Answer:
The amount of the allowance for doubtful debts is BD11,107.50.
Explanation:
Allowance for doubtful accounts can described as an estimate of the amount of accounts receivable which a business expects that it will not be collectible.
From the question, we have:
Credit sales = BD740,500
Estimated bad debts percentage = 1.5%
Therefore, allowance for doubtful debts can be calculated as follows:
Allowance for doubtful debts = Credit sales * Estimated bad debts percentage ............ (1)
Substituting the values into equation (1), we have:
Allowance for doubtful debts = BD740,500 * 1.5% = BD11,107.50
Therefore, the amount of the allowance for doubtful debts is BD11,107.50.
