A Company Uses the Percent of Sales Method to Determine

question 65

Multiple Choice

A company uses the percent of sales method to determine its bad debts expense.At the end of the current year,the company's unadjusted trial balance reported the following selected amounts: All sales are made on credit.Based on past experience,the company estimates that 0.6% of credit sales are uncollectible.What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

• A)$1,275
• B)$1,775
• C)$4,500
• D)$4,800
• E)$5,500

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Definitions:

Property

Assets or possessions owned by individuals or entities, ranging from real estate to intellectual property, legally recognized and protected.

Wrongful Interference

Unjustifiable meddling with the contractual or business relationships of others.

Business Relationship

A connection between individuals or organizations engaged in commercial or professional interactions.

Contractual Relationship

A legal binding between two or more parties, enforceable by law, involving mutual obligations.