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Using the percentage of credit sales technique, a bad debt charge of $4,605 is projected.
Method of calculating bad debt expense:
Credit losses = Net credit sales * Historical percentage of credit losses = $125,750* 4% $5,030
Allowance for doubtful accounts has a credit balance $425. The estimated bad debt expense can therefore be calculated as follows: Bad debt expense = Credit losses - allowance for doubtful accounts credit balance = $5,030 - $425 = $4,605
Therefore, the estimated bad debt expense using the percentage of credit sales method is $4,605.
To learn more about bad debt expense refer here:
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