A company bas $2,000,000 in sales, 98% of which are cash sales. If the company u

Question

A company bas $2,000,000 in sales, 98% of which are cash sales. If the company uses 1.5% of credit sales to estimate bad debt, what will the bad debt be for the year? What does the allowance account do to the amount of total assets on the balance sheet? no effect on assets decrease total assets decrease total assets increase total liabilities A company has $25.000 outstanding A/R at year end. The company's current aging report follows. Using it, what amount is needed for the bad debt expense? (Assume no beginning balance in allowance for doubtful accounts.) cannot determine without knowing actual amount collected $2,600

Explanation / Answer

     2 Details Amt $ Sales       2,000,000 Credit Sales @98%     1,960,000 Bad Debt estimate @1.5% of credit sales           29,400 As bad debt estimate is credited to Allowance   for Doubtful a/cs which is a contra asset a/c, The asset balance will be reduced . Option c is correct        3 Aging Report 0-30 days 31-60 days 61-90 days 91+days Amt             10,000              5,000               5,000         5,000 % Uncollectible 1% 2% 8% 40% Amt Uncollectible                 100                  100                   400         2,000 Total Bad debt expense $   2,600.00 (as there is no opening balance in Allowance for Uncollectibles) Option C is correct

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.