Data for the year ended December 31 are presented below: Sales (credit) $2,500,000 Sales returns and allowances 50,000 Accounts Receivable (December 31) 640,000 Allowance for Doubtful Accounts (Before adjustment at December 31) 20,000 Estimated amount of uncollected accounts based on aging analysis 45,000 Refer to AT&U Company. If the company estimates its bad debts at 1% of net credit sales, what amount will be reported as bad debt expense? a.$44,500 b.$25,000 c.$24,500 d.$4,500
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
| Sales (credit) | $2,500,000 |
| Sales returns and allowances | 50,000 |
| 640,000 | |
| Allowance for Doubtful Accounts | |
| (Before adjustment at December 31) | 20,000 |
| Estimated amount of uncollected accounts based on aging analysis | 45,000 |
Refer to AT&U Company. If the company estimates its
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