Over the Past Five Years, a Company Had Average Annual

question 93

Multiple Choice

Over the past five years, a company had average annual credit sales of $320,000 and write-offs this year of $2,000. Credit sales in the current year are $300,000. The balance in the Allowance for Doubtful Accounts is a
$500 credit. Using the percentage of credit sales method, and an estimate of 1%, what amount should the company record as an estimate of bad debt expense?

• A) $2,000
• B) $3,000
• C) $3,500
• D) $1,500

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Definitions:

Demand Curve

A graph showing the relationship between the price of a good and the quantity of that good which consumers are willing to purchase.

Quantity Axis

A graphical representation element used in economics to indicate quantities, such as quantities of goods produced or sold.

Marginal Revenue

The extra revenue earned from the sale of an additional unit of a product or service.

Maximize Profits

The process by which a firm adjusts its production and pricing strategies to earn the highest possible profit.