A Company Uses the Percent of Sales Method to Determine

question 38

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.

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Definitions:

Managing Emotions

The ability to recognize, understand, and appropriately express one's emotions in a way that promotes emotional well-being and interpersonal relationships.

Relationship Management

The strategy and processes for managing interactions and relationships with customers, clients, and stakeholders to build trust, loyalty, and long-term engagement.

Personalized Power Motive

A personal drive to control or influence others, often for self-serving purposes rather than communal goals.

Resolving Disputes

The process of finding solutions to disagreements or conflicts between parties through negotiation, mediation, or formal procedures.