Question
5. Gladson Corporation reports bad debt expense using the percentage of sales method. At the end of the year, Gladson has $450,000 in accounts receivable
5. Gladson Corporation reports bad debt expense using the percentage of sales method. At the end of the year, Gladson has $450,000 in accounts receivable and a $4,000 credit in its allowance for doubtful accounts before any entry is made for bad debts. Sales for the year were $1.9 million. The percentage that Gladson has historically used to calculate bad debts is 1 percent of sales. Which of the following is true?
a. Gladson's bad debt expense for the year is $15,000.
b. Gladson's bad debt expense for the year is $23,000.
c. Gladson would report an allowance for doubtful accounts of $23,000.
d. Gladson would report an allowance for doubtful accounts of $19,000.
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