Jefferson Uses the Percent of Sales Method of Estimating Uncollectible

question 5

Multiple Choice

Jefferson uses the percent of sales method of estimating uncollectible expenses. Based on past history, 2% of credit sales are expected to be uncollectible. Sales for the current year are $5,550,000. Which of the following is correct?

• A) Uncollectible accounts are estimated to be $55,500.
• B) Uncollectible accounts are estimated to be $111,000.
• C) Bad debt expense is estimated to be $5,550.
• D) Bad debt expense is estimated to be $11,100.

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Definitions:

Liability Reported

The representation of an entity's obligations or debts on its financial statements, indicating amounts owed to creditors.

Income Statement

A document detailing a firm's income, outlays, and profit over a given timeframe.

Balance Sheet

A financial statement that outlines an entity's assets, liabilities, and equity at a specific point in time.

Unearned Revenue

Money received by an entity for services not yet performed or goods not yet delivered.