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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