Reference no: EM132840783

Flyer Company has provided the following information prior to any year-end bad debt adjustment:

Cash sales, $157,000
Credit sales, $457,000
Selling and administrative expenses, $117,000
Sales returns and allowances, $37,000
Gross profit, $497,000
Accounts receivable, $175,000
Sales discounts, $21,000
Allowance for doubtful accounts credit balance, $1,900

Problem 1: Flyer estimates bad debt expense assuming that 2.5% of credit sales have historically been uncollectible. What is the balance in the allowance for doubtful accounts after bad debt expense is recorded?

Option 1: $9,525.

Option 2: $13,450.

Option 3: $13,325.

Option 4: $11,425.