A Company Uses the Percent of Sales Method to Determine

question 203

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:
$$\begin{array} { l l } \text { Accounts receivable } & \$ 375,000 \text { debit } \\\text { Allowance for uncollectible accounts } & 500 \text { credit } \\\text { Net Sales } & 800,000 \text { credit }\end{array}$$
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) $1,275
• B) $1,775
• C) $4,500
• D) $4,800
• E) $5,500