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Question

if sid inc. has net sales of $750,000, sales on account of $600,000, and sales returns and allowances of $50,000, what would be the bad debt expense for the year, assuming that sid uses an estimate of 12% for bad debts?

Answer

Dear students, I would like to inform you that Sid Inc. is expected to incur a bad debt expense of $72,000 for the current year, based on an estimated percentage of 12% for bad debts. The company has reported net sales of $750,000, out of which $600,000 were on account and $50,000 were due to sales returns and allowances. Let me clarify that a sales return refers to the return of goods by a consumer to the company, and the account "Sales Returns and Allowances" is used to record such returns. The physical return of products is mandatory, and upon return, the consumer may receive either a refund or credit to their account in exchange. Similarly, a sales allowance occurs when a customer consents to accept the item for a lower price than it was initially sold for. Both instances are considered sales adjustments and are recorded under "Sales Returns and Allowances." It is worth noting that returns may impact a business's sales and profits, as they may choose to replace the products or refund the customers' money. To ensure accurate balance sheets, it is important to track returns. For more information on sales returns, please visit brainly.com/question/28938950 #SPJ4.