Libby Company uses the percentage of credit sales method for calculating Bad Debt Expense. The company reported $226,500 in total sales during the year; $185,000 of which were on credit. Libby has experienced bad debt losses of 7% of credit sales in prior periods. What is the estimated amount of Bad Debt Expense for the year?

Question

Business

Harvey

25 October, 10:07

Libby Company uses the percentage of credit sales method for calculating Bad Debt Expense. The company reported $226,500 in total sales during the year; $185,000 of which were on credit. Libby has experienced bad debt losses of 7% of credit sales in prior periods. What is the estimated amount of Bad Debt Expense for the year?

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Hayden Mathews · Answer 1

The estimated amount of Bad Debt Expense for the year is $12,950

Explanation:

According to the given data we have the folloiwng:

reported sales during the year = $226,500

credit sales=$185,000

Libby has experienced bad debt losses of 7% of credit sales in prior periods

Therefore, in order to calculate the estimated amount of Bad Debt Expense for the year we would have to make the following calculation:

estimated amount of Bad Debt Expense=credit sales*bad debt losses percentage of credit sales in prior periods.

Hence, estimated amount of Bad Debt Expense = $185,000 * 7%

estimated amount of Bad Debt Expense = $12,950

The estimated amount of Bad Debt Expense for the year is $12,950