Question
XYZ Company estimates its bad debts as 2% of its annual credit sales. XYZ records its Bad Debts Expense for that estimate. During the current
XYZ Company estimates its bad debts as 2% of its annual credit sales. XYZ records its Bad Debts Expense for that estimate. During the current year, XYZ written off some of its customers account as bad debt. The total write off was $33,000. However, during the same accounting period, one of the customers Ahmed, unexpectedly pays the amount of $ 450 that was previously written off. You are expected to be able to answer the questions using the following information summarized below:
Total Credit sales $2,200,000
Accounts Receivable on December 31 $825,000
Bad Debts written off $33,000
Assume that XYZ Company estimates its bad debt expense to be 2% of credit sales how much will XYZ Company record the estimate if it has an Allowance for Doubtful Accounts credit balance of $4,000?
a.
$44,000
b.
None of the given options.
c.
$ 40,000
d.
$4,000
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