Brown Furniture Company Decided to Go After the Younger Market

question 10

Multiple Choice

Brown Furniture Company decided to go after the younger market to create a newer customer base. In doing so, Ms. Brown offered a liberal credit policy and estimated she would have a 5% bad debt expense. In 2018, sales under this promotion were $600,000. Accordingly, she estimated a bad debt expense of $30,000. Her actual bad debt expenses were far less than expected, at about 3%, and this rate will be used for 2019. Her 2019 sales under the program are $860,000. How much bad debt expense should be reported on the comparative income statements based on this information?

• A) 2018, $18,000; 2019, $25,800
• B) 2018, $30,000; 2019, $30,000
• C) 2018, $30,000; 2019, $25,800
• D) 2018, $30,000; 2019, $43,000

---

Definitions:

Adjusting Entries

Journal entries made in accounting to update the records for expenses and revenues that have accrued but are not yet recorded.

Daily Wages

The amount of money that a worker earns for one day of labor.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting the consumption of the asset.

Office Supplies

Items and equipment regularly used in offices by businesses and other organizations, including paper, pens, and stationery.