Financial Accounting: Bad Debt Expense Estimate Question?

Question

XYZ Corp. uses the percentage of credit sales method in determining its bad debt expense. The following information comes from the accounting records of XYZ Corp.:


Cash sales $220,000
Credit sales 780,000
Total sales 1,000,000
Credit balance in the Allowance for Doubtful Accounts 6,000
Bad debt loss rate 3%

What is the estimate of bad debt expense?

$23,400
$24,000
$29,400
$30,000

Answer 1

Hello Becky,

 

 

XYZ  Corporation uses the percentages of credit sales method to calculate their bad debt expense.

 

 

Bad debt loss is 3%   (given)

 

Credit sales is $780,000

 

$780,000 x.03 =   $23,400

 

 

Best of luck!!