Milo company uses the percent-of-sales method to estimate uncollectibles. net credit sales for the current year amount to $100,000, and management estimates 4% will be uncollectible. allowance for doubtful accounts prior to adjustment has a credit balance of $3,000. the amount of expense to report on the income statement will be
a. $7,000.
b. $4,000
c. $6,000
d. $1,500

correct option is B. $4,000

Explanation:

given data

Net credit sales =  $100,000

management estimates = 4%

solution

we know here Net credit sales is = 100000  

so bad debts expenses will be

debts expenses = 100000 × 4%

debts expenses = $4000

so amount of expense to report on the income statement will be $4000

and after adjustments = will be $4000 + $3000 = $7,000

so correct option is B. $4,000

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