The books of Fiona Corporation provided the following information: Beginning bal

ID: 2409728 • Letter: T

Question

The books of Fiona Corporation provided the following information:

Beginning balances:

Accounts receivable $ 50 000

Allowances for doubtful accounts (a credit) 3 000

Transactions during the year:

Sales revenue (of which 1/2 were on credit) 3 000 000

Collections on accounts receivable 980 000

Accounts written off as uncollectible 4 000

Past collection experience has indicated that 1% of credit sales normally are not collected.

Therefore, an adjusting entry for bad debt expense should be made in the amount of:

a. $47,000

b. $20,000

c. $15 000

d. $7,000

e. $1500

In the percentage of credit sales method for bad debts, the Balance in Allowances for doubtful accounts is ignored.

Given Sales = $3000000

Credit sales are 1/2 of Sales = $3000000*1/2 = $1500000

Estimate made based on past experience = 1%

Therefore the adustment for bad debts will be $1500000*1% = $15000

Option C is correct

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