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:

Net Operating Income

A measure of a company's profitability from its regular, core business operations, excluding deductions of interest and taxes.

Average Operating Assets

The average value of a company's assets used in day-to-day operations over a specific period, used in calculating rates of return.

Sales

The total amount of goods or services sold by a company within a certain period of time.