Jefferson Uses the Percent of Sales Method of Estimating Uncollectible

question 11

Multiple Choice

Jefferson uses the percent of sales method of estimating uncollectible expenses. Based on past history, 2% of credit sales are expected to be uncollectible. Sales for the current year are $5,550,000. Which of the following is correct regarding the entry to record estimated uncollectible receivables?

• A) Cash will be debited.
• B) Bad Debt Expense will be credited.
• C) Allowance for Doubtful Accounts will be credited.
• D) Accounts Receivable will be debited.

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Definitions:

Selling Price

The amount of money for which an item or service is sold in the market.

Operating Cash Flow

Represents the amount of cash generated by a company's normal business operations.

Interest Expense

The cost incurred by an entity for borrowed funds.

Tax Rate

The proportion of income or profits taken as tax by the government from an individual or company.