A Company Uses the Percent of Sales Method to Determine

question 93

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 amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

• A) $1,275
• B) $1,775
• C) $4,500
• D) $4,800
• E) $5,500

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Definitions:

Abbreviation

A shortened form of a word or phrase used to simplify writing and speaking.

Transdermal

Through the skin.

Subcutaneous

Pertaining to or situated under the skin.

Intrathecal

Refers to the administration of medication or other substances directly into the space under the arachnoid membrane of the spinal cord.