Answer:
The estimated bad debt expense using the percentage of credit sales method is $4,250.
Explanation:
Credit losses = Net credit sales * Historical percentage of credit losses = $122,500 * 4% = $4,900
Allowance for doubtful accounts has a credit balance = $650.
The estimated bad debt expense can therefore be calculated as follows:
Bad debt expense = Credit losses - allowance for doubtful accounts credit balance = $4,900 - $650 = $4,250
Therefore, the estimated bad debt expense using the percentage of credit sales method is $4,250.
