The Following Information Is from the 2016 Records of Armand

question 6

Multiple Choice

The following information is from the 2016 records of Armand Camera Shop:
$$\begin{array} { | l | l | } \hline \text { Accounts receivable, 31 December 2016 }&\$ 45,000 \text { (debit) } \\\hline \text { Allowance for doubtfu l debts, 31 December 2016 } \\\text { prior to adjustment } & 1500 \text { (debit) } \\ \hline \text { Net credit sales for 2016 } & 178,000\\ \hline \text { Accounts written off as uncollectable during 2016 } & 16,000 \\\hline \text { Cash sales during 2016 } & 30,000 \\\hline\end{array}$$
Bad debts expense is estimated by the percentage of sales method.The management estimates that 4% of net credit sales will be uncollectable.Calculate the amount of bad debts expense for 2016.

• A) $5320
• B) $7120
• C) $5620
• D) $8320

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Definitions:

Indirect Expenses

Expenses that cannot be directly linked to the production of goods or services, such as administrative salaries and utilities.

Contribution Margin

The Contribution Margin represents the amount of revenue from sales that exceeds variable costs, contributing to covering fixed costs and generating profit.

Sales

The total amount of revenue generated by the selling of goods or services by a company within a specific period.

Department

A specialized functional area within an organization that focuses on specific tasks or responsibilities.