Question 34 (1 point) Lifecycle Management Corporation uses the percentage-of-sa

Question

Question 34 (1 point) Lifecycle Management Corporation uses the percentage-of-sales method to record its allowance for doubtful accounts. Net credit sales for the year were $250,000 and management estimates 2% will be uncollectible. Total sales were $500,000. The balance in accounts receivable and allowance for doubtful accounts at the end of the year, prior to the adjustment, is $50,000 and $500 respectively. The net accounts receivable balance after recording the current year bad debt expense is: O $39,500 $5,500 $49,500 $50,000 o $44,500

Explanation / Answer

Answer : $44,500

Net credit sales $ 250,000.00 Amount received from debtors $ 200,000.00 (250000-50000) Balance receivables before adjustment $   50,000.00 Current year allowance $     5,000.00 (250000*2%) Allowance balance before adjustment $        500.00 Allowance for doubtful debts provided for $     5,500.00 (5000+500) Net accounts receivable balance $   44,500.00 (50000-5500)

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