Fleet Transportation Is a New Business

question 124

Essay

Fleet Transportation is a new business.During its first year of operations,credit sales were $40,000 and collections of credit sales were $36,000.One account,$650,was written off.Management uses the percent-of-sales method to account for bad debts expense and estimates 2% of credit sales to be uncollectible.Prepare the entry to record bad debts expense.Omit explanation.

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Definitions:

Operating Profit

Earnings before interest and taxes (EBIT), representing the profit a business makes from its operations.

Selling Price

The amount for which a product or service is sold to the customer.

Unit Cost

The expenditure involved in generating, keeping, or obtaining one unit of a product or service.

Overhead

An ongoing expense of operating a business, such as rent, utilities, and salaries.