A Company Uses the Percent of Sales Method to Determine

Multiple Choice

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: Accounts receivable $375,000 debit
Allowance for uncollectible accounts 500 credit
Net Sales 800,000 credit
All sales are made on credit. Based on past experience, the company estimates that 0.6% of net credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

A) $5,500
B) $1,275
C) $1,775
D) $4,800
E) $4,500