The Allowance for Doubtful Debts Currently Has a Debit Balance

question 133

Multiple Choice

The Allowance for doubtful debts currently has a debit balance of $200. The company's management estimates that 2.5% of net credit sales will be uncollectable. Net credit sales are $115 000. What will be the amount of Bad debts expense reported on the income statement?

• A)$2 875
• B)$3 275
• C)$3 075
• D)$2 675

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Definitions:

Square Footage

The measurement of area in square feet, often used to determine the size of a room, building, or piece of land.

Indirect Expense

Costs that are not directly linked to a specific product, service, or cost object and often relate to the general operation of a business.

Investment Turnover

A measure of a company's efficiency in using its assets to generate sales revenue, calculated by dividing sales by the average total assets.

Profit Margin

A financial metric that measures the percentage of revenue that exceeds the cost of goods sold, indicating the profitability of a company's sales.