Question

Jefferson uses the percent of sales method of estimating uncollectible expenses. Based on past history, 2% of credit sales are expected to be uncollectible. Sales for the current year are $5,550,000. Which of the following is correct?A) Bad debt expense is estimated to be $11,100.B) Uncollectible accounts are estimated to be $111,000.C) Uncollectible accounts are estimated to be $55,500.D) Bad debt expense is estimated to be $5,550.

Answer 1

Answer:

B) Uncollectible accounts are estimated to be $111,000

Explanation:

Jefferson uses the percent of sales method. His bad debt expense is calculate directly, without considering the current allowance balance.

2% of sales

2% of 5,550,000 = 111,000