The Lowell Corporation is considering opening a store in Lawrence. The Lowell Co

Question

The Lowell Corporation is considering opening a store in Lawrence. The Lowell Corporation estimates that the Lawrence store will generate credit sales of $300,000 in its first year. The Lowell Corporation expects the products the Lawrence store sells will cost the Lawrence store 75% of the sales prices it charges its customers. The Lawrence store's expected major operating expenses, such as salaries, wages, and utilities, will be 15% of sales revenue. It is expected that 2% of the Lawrence store's credit sales will never be collected. Determine the Lawrence store's first year uncollectible accounts expense.

Explanation / Answer

since it is estiamted that uncollecible amount will be 2% of credit sales

credit sales given is $300,000

hence uncollectible accounts expense = $300,000 @2% = $6,000

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