On average, 5% of total accounts receivable has been uncollectible in the past. At the end of the year, balance of accounts receivable is $100,000 and the allowance for doubtful accounts has a credit balance of $500. Credit sales during the year were $150,000. Using the aging of accounts receivable method, the estimated bad debt expense would be:

Multiple Choice

• $5,500
• $6,000
• $4,500
• indeterminable; the aging of accounts receivable method cannot be used, because, based on this information, the percentage of credit sales method should be used.
• $5,000