Lewis company uses the allowance method for recording its expected credit losses. it estimates bad debts at 2% of credit sales, which were $900,000 during the year. on december 31, the accounts receivable balance was $150,000, and the allowance for doubtful accounts has a balance of $12,200 before adjustments. what is the amount of bad debt expense lewis company will report on their income statement this year?

The amount which is to be reported in the income statement under the head of bad debt expense is $18,000

Explanation:

The company had a bad debts of 2% on credit sales, and that amounts for the year is $900,000. So, it is computed as:

Bad debt expense = Credit Sales × 2%

                               = $900,000 × 2%

                               = $18,000

Therefore, the amount of $18,000 will be the bad debt expense of the company for the year.