Assume Simple Co. had credit sales of $253,000 and cost of goods sold of $153,000 for the period. Simple uses the percentage of credit sales method and estimates that 2 percent of credit sales would result in uncollectible accounts. Before the end-of-period adjustment is made, the Allowance for Doubtful Accounts has a credit balance of $280. What amount of Bad Debt Expense would the company record as an end-of-period adjustment?

$4,780

Explanation:

When a company makes sales on account, debit accounts receivable and credit sales. Based on assessment, some or all of the receivables may be uncollectible.  

To account for this, debit bad debit expense and credit allowance for doubtful debt. Should the debt become uncollectible (i.e go bad), debit allowance for doubtful debt and credit accounts receivable.

Where a debit that had previously been determined to have gone bad gets settled, debit cash and credit bad debt expense.

Allowance required

= 2% * $253,000

= $5,060

Since the Allowance for Doubtful Accounts has a credit balance of $280, the  amount of Bad Debt Expense required as an  end-of-period adjustment is

= $5,060 - $280

= $4,780

i'ts proportional. if the inflation rate is 12% for example, the cpi will be 12% less.

hope it ,

bioteacher101