The following information is from the 2017 records of Armand Music Shop: Accounts receivable, December 31, 2017 $43,000 (debit) Allowance for Bad Debts, December 31, 2017 prior to adjustment 1,500 (debit) Net credit sales for 2017 178,000 Accounts written off as uncollectible during 2017 18,000 Cash sales during 2017 25,000 Bad debts expense is estimated by the percent-of-sales method. Management estimates that 6% of net credit sales will be uncollectible. Calculate the amount of bad debts expense for 2017.

Question

Kaila Avila

Business

19 May, 15:26

The following information is from the 2017 records of Armand Music Shop: Accounts receivable, December 31, 2017 $43,000 (debit) Allowance for Bad Debts, December 31, 2017 prior to adjustment 1,500 (debit) Net credit sales for 2017 178,000 Accounts written off as uncollectible during 2017 18,000 Cash sales during 2017 25,000 Bad debts expense is estimated by the percent-of-sales method. Management estimates that 6% of net credit sales will be uncollectible. Calculate the amount of bad debts expense for 2017.

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Berlynn · Answer 1

The bad debt expense amounts to $ 10,680

Explanation:

The bad debt expenses for the year 2017 is computed as:

As the percent of sakes method is used for estimating the bad debt expense. Therefore, it is computed as:

Bad debt expense = Net Credit Sales * Estimate Percent

where

Net credit sales amounts to $178,000

Estimate percent is 6%

So, putting the values above:

Bad debt expense = $178,000 * 6%

Bad debt expense = $10,680

Therefore, the bad debt expense amounts to $10,680