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23 August, 15:24

Ava Company sets bad debt expense at 3 percent of its sales. Ava reported total sales of $ 71,572. Before the adjustment, Ava had $655 credit balance in its allowance for doubtful accounts. How much bad debt expense did Ava report on its income statement?

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  1. 23 August, 15:27
    0
    The Amount to be reported of bad debt expense on the income statement is $ 2,147.16

    Explanation:

    Acording to the data, the company sets bad debt expense at 3 percent of its sales.

    Total sales reported of the company is $ 71,572

    Amount to be reported of bad debt expense on the income statement

    = $ 71,572 * 3%

    = $ 2,147.16.
  2. 23 August, 15:31
    0
    Bad Debt expenses Ava reports on its income statement is $2,147.16.

    Explanation:

    As Ava company bad debt expenses is calculated according to the percentage of sales; the current balance of allowance for doubtful accounts is irrelevant to deciding the bad debt expenses in the period.

    The bad debt expenses recorded in the period is calculated as: Total credit sales x percentage of estimated bad debt from credit sales = 71,572 x 3% = $2,147.16.

    So, the bad debt expenses recorded in the accounting period in the income statement is $2,147.16.
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