A Company Used the Percent of Sales Method to Determine

question 133

Multiple Choice

A company used 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:
$$\begin{array} { | l | r | } \hline \text { Accounts receivable } & \$ 245,000 \text { debit } \\\hline \text { Allowance for uncollectible accounts } & 300 \text { credit } \\\hline \text { Net Sales } & 900,000 \text { credit } \\\hline\end{array}$$
All sales are made on credit.Based on past experience,the company estimates 0.5% of credit sales to be uncollectible.What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

• A) $925
• B) $1,225
• C) $4,200
• D) $4,500
• E) $45,000

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Definitions:

Volatile Chemicals

Substances that easily vaporize at normal temperatures and pressures, often having strong odors.

Herbivory

The act of eating plants or plant parts by animals, which can significantly influence plant population and community structure.

Parasitize

To live as a parasite in or on another organism, deriving nutrients at the host's expense without offering any beneficial return.

Diploid

Referring to cells that contain two complete sets of chromosomes, one from each parent, characteristic of the body's somatic cells.