superior company has provided you with the following information before any year-end adjustments: net credit sales are $125,750. historical percentage of credit losses is 4%. allowance for doubtful accounts has a credit balance of $425. accounts receivables ending balance is $55,500. what is the estimated bad debt expense using the percentage of credit sales method?

Question

04-11-2022
Business

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superior company has provided you with the following information before any year-end adjustments: net credit sales are $125,750. historical percentage of credit losses is 4%. allowance for doubtful accounts has a credit balance of $425. accounts receivables ending balance is $55,500. what is the estimated bad debt expense using the percentage of credit sales method?

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sapanpandit sapanpandit · Answer 1 · 2022-11-09T10:52:38-05:00

Using the percentage of credit sales technique, a bad debt charge of $4,605 is projected.

Method of calculating bad debt expense:

Credit losses = Net credit sales * Historical percentage of credit losses = $125,750* 4% $5,030

Allowance for doubtful accounts has a credit balance $425. The estimated bad debt expense can therefore be calculated as follows: Bad debt expense = Credit losses - allowance for doubtful accounts credit balance = $5,030 - $425 = $4,605

Therefore, the estimated bad debt expense using the percentage of credit sales method is $4,605.

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