Sanchez Inc If Sanchez Estimates Bad Debts at 5% of Net Credit

question 83

Multiple Choice

Sanchez Inc. sells to customers only on credit. For the year ended December 31, 2017, the following information is provided:
$\begin{array}{lrr} \text {Sales revenue } &\$850,000\\ \text {Accounts receivable, 1/01/17 } &230,000\\ \text { Allowance for doubtful accounts, \( 12 / 31 / 17 \) (before adjustment for bad debts) } &600\\ \text { Collections during 2017 } &470,000\\ \text { Accounts written off as uncollectible during 2017 } &13,000\\ \text {Sales returns } &7,000\\\end{array}$


If Sanchez estimates bad debts at 5% of net credit sales, how much is bad debt expense?

• A)$34,000
• B)$15,200
• C)$23,400
• D)$42,150

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Definitions:

Marginal Cost

Marginal cost is the increase in total cost that arises from producing one additional unit of a good or service, a critical concept in economic decision-making and pricing strategies.

Average Variable Cost

The total variable cost divided by the quantity of output produced, indicating the cost of producing each additional unit.

Market Price

The current value at which an asset or service can be bought or sold in a particular marketplace.

Average Total Costs

This term refers to the total costs (fixed plus variable) of production divided by the total quantity of output produced.