On Average,5% of Credit Sales Has Been Uncollectible in the Past.At

question 85

Multiple Choice

On average,5% of credit sales has been uncollectible in the past.At the end of the year,the balance of accounts receivable is $100,000 and the allowance for doubtful accounts has a credit balance of $500.Net credit sales during the year were $150,000.Using the percentage of credit sales method,the estimated bad debt expense would be:

• A)$5,000.
• B)$7,000.
• C)$7,500.
• D)Cannot be determined; the percent of credit sales method cannot be used,as the information provided can only be used for calculating the aging of accounts receivable method.

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Definitions:

Space Occupied

The area taken up or used by a business, organization, or equipment within a physical location.

Step-down Method

An allocation technique used in cost accounting to distribute indirect costs to various departments or products step by step, considering interactions among the departments.

Allocation Base B

Refers to a criterion or standard used to distribute costs among different cost objects, often used in activity-based costing.

Step-down Method

An accounting approach for distributing overhead expenses across different departments or products.