Flyer Company has provided the following information prior to any year-end bad debt adjustment: • Cash sales, $150,000 • Credit sales, $450,000 • Selling and administrative expenses, $110,000 • Sales returns and allowances, $30,000 • Gross profit, $290,000 • Accounts receivable, $110,000 • Sales discounts, $14,000 • Allowance for doubtful accounts credit balance, $1,200 Flyer estimates bad debt expense assuming that 1.5% of credit sales have historically been uncollectible. How much is Flyer's bad debt expense? Group of answer choices A)$7,950 b)$6,750 C)$5,550 D)$9,000 E)None of the above
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.
• Cash sales, $150,000
• Credit sales, $450,000
• Selling and administrative expenses, $110,000
• Sales returns and allowances, $30,000
• Gross profit, $290,000
• Accounts receivable, $110,000
• Sales discounts, $14,000
• Allowance for doubtful accounts credit balance, $1,200
Flyer estimates bad debt expense assuming that 1.5% of credit sales have historically been uncollectible. How much is Flyer's bad debt expense?
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