An up and coming tennis shoe manufacturer sells its shoes to boutique retail stores. The controller has been accounting for bad debts from its retail store customers using the percentage of sales method, and has determined that the percentage of receivables method would result in a more accurate representation of the company's Accounts Receivable. In the three years the company has been operating, total bad debt expense of $60,000 has been reported using the percentage of sales method. Under the percentage of receivables method, the controller has prepared an aging schedule and determined that total bad debt expense of $54,000 would have been reported. The company's tax rate is 35%.

account title Debit Credit

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