A Company Used the Percent of Sales Method to Determine

question 142

Multiple Choice

A company used 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 1% 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 $19,750; credit Allowance for Doubtful Accounts $19,750.
• B) Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225.
• C) Debit Bad Debts Expense $22,250; credit Allowance for Doubtful Accounts $22,250.
• D) Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350.
• E) Debit Bad Debts Expense $21,000; credit Allowance for Doubtful Accounts $21,000.

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Definitions:

Extremism

Holding extreme political or religious views.

Socialism

An economic and political system where the means of production are owned and controlled by the state or public, aiming for equal distribution of wealth and resources.

Individualism

A concept that gives preference to individual freedoms, liberties, and rights.

Communism

A political and economic ideology that aims for a classless society where all property is publicly owned, and each person works and is paid according to their abilities and needs.