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Libre, Inc. has experienced bad debt losses of 5% of credit sales in prior periods. At the end of the year, the balance of Accounts Receivable is $121,000 and the Allowance for Doubtful Accounts has an unadjusted credit balance of $1,550. Net credit sales during the year were $192,000. Using the percentage of credit sales method, what is the estimated Bad Debt Expense for the year

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Answer:

Estimated Bad Debts = $ 9600

Explanation:

Libre, Inc.

Accounts Receivable  $121,000

Allowance for Doubtful Accounts  un adjusted  $1,550 Credit

Net credit sales $192,000

The percentage of credit sales method, what is the estimated Bad Debt Expense for the year=  5% of $192,000 = $ 9600

Unadjusted balance Allowance for Doubtful Accounts $1,550 Credit

Less Current Year Bad Debts Balance = $ 9600

Adjustment= $ 8050

When using the percent of sales method the estimate of bad debts is the percentage multiplied with the credit sales .

Estimated Bad Debts = $ 9600

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