Question

Plasma Inc. uses the percentage of credit sales method to estimate Bad Debt Expense. The company reported net credit sales of $500,000 during the year. Plasma has experienced bad debt losses of 2% of credit sales in prior periods. At the beginning of the year, Plasma has a credit balance in its Allowance for Doubtful Accounts of $4,000. No write-offs or recoveries were recorded during the year. What amount of Bad Debt Expense should Plasma recognize for the year?

A) $4,000

B) $6,000

C) $10,000

D) $14,000

Answer

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