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Question(s) / Instruction(s):

A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts:

           

A/R                                                                        $355,000 debit balance

Allowance for Doubtful accounts               $500 credit balances

Net Sales                                                            $800,000 credit balance

            All sales are made on credit. Based on past experience, the company estimates 0.6% of credit sales to be uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

a)            $1,275

b)            $1,775

c)            $4,500

d)            $4,800

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