A Company Used the Percent of Sales Method to Determine

question 18

Multiple Choice

A company used 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:
All sales are made on credit.Based on past experience,the company estimates 1% of credit sales to be uncollectible.What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

• A)Debit Bad Debts Expense $19,750; credit Allowance for Doubtful Accounts $19,750.
• B)Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225.
• C)Debit Bad Debts Expense $22,250; credit Allowance for Doubtful Accounts $22,250.
• D)Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350.
• E)Debit Bad Debts Expense $21,000; credit Allowance for Doubtful Accounts $21,000.

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Definitions:

Net Profit Margin

Net profit margin is a financial ratio that shows what percentage of a company's revenues remain as net income after all expenses are deducted.

Earnings Per Share

A financial ratio that measures the portion of a company’s profit allocated to each outstanding share of common stock, indicating company profitability.

Time Management

Making effective use of available time.

Planning

The process of setting goals, developing strategies, and outlining tasks and schedules to achieve the desired goals.