Ava Company sets bad debt expense at 3 percent of its sales. Ava reported total sales of $ 71,572. Before the adjustment, Ava had $655 credit balance in its allowance for doubtful accounts. How much bad debt expense did Ava report on its income statement?

The Amount to be reported of bad debt expense on the income statement is $ 2,147.16

Explanation:

Acording to the data, the company sets bad debt expense at 3 percent of its sales.

Total sales reported of the company is $ 71,572

Amount to be reported of bad debt expense on the income statement

= $ 71,572 * 3%

= $ 2,147.16.

Bad Debt expenses Ava reports on its income statement is $2,147.16.

Explanation:

As Ava company bad debt expenses is calculated according to the percentage of sales; the current balance of allowance for doubtful accounts is irrelevant to deciding the bad debt expenses in the period.

The bad debt expenses recorded in the period is calculated as: Total credit sales x percentage of estimated bad debt from credit sales = 71,572 x 3% = $2,147.16.

So, the bad debt expenses recorded in the accounting period in the income statement is $2,147.16.