Question

Jensen Company uses the percentage of credit sales method for calculating Bad Debt Expense. The company reported $216,000 in total sales during the year; $178,000 of which were on credit. Jensen has experienced bad debt losses of 6% of credit sales in prior periods. What is the estimated amount of Bad Debt Expense for the year

Answer 1

Answer:

$10,680

Explanation:

Bad debt expense can be seen as an account receivables which are uncollectible during a period of time because of the customers inability to fulfill his /her financial obligations which therefore result into bad debt.

(Bad Debt Expense = Net credit sales × Bad debt loss rate )

= $178,000 × 0.06 = $10,680

Therefore the estimated amount of Bad Debt Expense for the year is $10,680