A Company Uses the Percent of Sales Method to Determine

question 85

Multiple Choice

A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: $\begin{array}{ll}\text { Accounts receivable } & \$ 375,000 \text { debit } \\\text { Allowance for unco llectible accounts } & 500 \text { credit } \\\text { Net Sales } & 800,000 \text { credit }\end{array}$ All sales are made on credit. Based on past experience, the company estimates that 0.6% of net credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

• A)$5,500
• B)$1,275
• C)$1,775
• D)$4,800
• E)$4,500

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