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20 June, 07:28

Cashier's checks Checks Question 5 0/1 pts If Sid Inc. has net sales of $750,000, sales on account of $600,000, and sales returns and allowances of $50,000, what would be the bad debt expense for the year, assuming that Sid uses an estimate of 12% for bad debts? A. $72,000 B. $66,000 C. $90,000 D. $18,000

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  1. 20 June, 07:31
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    Option A,$72000

    Explanation:

    Bad debt expense is computed on the net credit sales amount, in other words, the bad debt expense is 12% of credit sales of $600,000.

    Bad debt expense=$600,000*12%

    =$72000

    Option C is wrong because the answer was arrived at by calculating 12% of $750,000 the net sales amount that also has cash sales of $150,000 included in it ($750000-$600000)

    Option B is wrong as the amount of sales returns and allowances of $50,000 was deducted from $600,000 prior to applying 12% allowance for bad debt
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