A Company Uses the Percent of Sales Method to Determine

question 114

Multiple Choice

A company uses 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: All sales are made on credit. Based on past experience, the company estimates 0.6% of credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

• A)Debit Bad Debts Expense $2,130; credit Allowance for Doubtful Accounts $2,130.
• B)Debit Bad Debts Expense $2,630; credit Allowance for Doubtful Accounts $2,630.
• C)Debit Bad Debts Expense $4,300; credit Allowance for Doubtful Accounts $4,300.
• D)Debit Bad Debts Expense $4,800; credit Allowance for Doubtful Accounts $4,800.
• E)Debit Bad Debts Expense $5,300; credit Allowance for Doubtful Accounts $5,300.

---

Definitions:

Information-processing Requirements

The demands placed on systems or individuals for the collection, analysis, and dissemination of data.

Position Analysis Questionnaire (PAQ)

A standardized job analysis questionnaire containing 194 questions about work behaviors, work conditions, and job characteristics that apply to a wide variety of jobs.

Job Incumbents

Individuals currently holding a particular job position, responsible for fulfilling the duties and responsibilities of that role.

Structured Environment

A setting where activities and behaviors are organized according to rules, schedules, and procedures to promote order and efficient function.