Question

Sage Company’s unadjusted trial balance at December 31, 2020, included the following accounts. Debit Credit Accounts receivable $50,500 Allowance for doubtful accounts 5,670 Net sales $1,255,000 Sage Company estimates its bad debt expense to be 5% of gross accounts receivable. Determine its bad debt expense for 2020.

Answer 1

Answer:

$2,525

Explanation:

Though net sales $1,255,000 but it did not indicate the portion of cash collected and account receivables, then we assume all sales is cash revenues.

Gross account receivables is $50,500 then its bad debt expense is $2,525 = 5% * $50,500