The Allowance for Bad Debts Account Has a Credit Balance

question 47

Multiple Choice

The Allowance for Bad Debts account has a credit balance of $3,000 before the adjusting entry for bad debts expense.The company's management estimates that 5% of net credit sales will be uncollectible for the year 2017.Net credit sales for the year amounted to $290,000.What is the amount of Bad Debts Expense reported on the income statement for 2017?

• A)$14,500
• B)$17,500
• C)$7,250
• D)$11,500

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Definitions:

Estate for Years

A fixed-term tenancy agreement in real estate that begins and ends on specific dates.

Fee Simple Defeasible

A type of real estate ownership that is conditional and can be voided if certain conditions are not met or specific events occur.

Qualified Fee

A type of estate in land that is subject to certain conditions or limitations, often contrasted with absolute ownership.

Alcoholic Beverages

Drinks containing ethanol, commonly known as alcohol, regulated by law in many parts of the world.