The Allowance for Bad Debts Account Has a Credit Balance

question 70

Multiple Choice

The Allowance for Bad Debts account has a credit balance of $2,000. The company's management estimates that 2% of net credit sales will be uncollectible for the year 2015. Net credit sales for the year amounted to $250,000. What will be the amount of Bad Debts Expense reported on the income statement for 2015?

• A)$5,000
• B)$3,075
• C)$2,875
• D)$2,675

Analyze and determine planning, flexible, and actual budgets.

Evaluate performance through variance analysis including spending, activity, and overall variances.

Understand the impact of activity levels on budgeted and actual costs and incomes.

Interpret and solve for net operating income under different scenarios.

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Definitions:

Trade Discount

A reduction in the listed price of goods or services offered by sellers to buyers in the same trade, often based on volume or early payment.

Manufacturer's Suggested Retail Price

The price that a product’s manufacturer recommends it be sold for at the retail level.

Cash Discount

A discount offered to purchasers for paying their bill within a specified period, encouraging early payment.

Hormel

An American company known for its food products, particularly meats.