Question

Problem 8-04A a-c Here is information related to Pharoah Company for 2022 Total credit sales $1,383,000 Accounts receivable at December 31 691,500 Bad debts written off 36,900 (a) What amount of bad debt expense will Pharoah Company report if it uses the direct write-off method of accounting for bad debts? Bad debts expense (b) Assume that Pharoah Company uses the percentage-of-receivables basis to record bad debt expense and concludes that 4% of accounts receivable will become uncollectible. What amount of bad debt expense will the company record if Allowance for Doubtful Accounts has a credit balance of $3,300? Bad debts expense (C) Assume the same facts as in (b), except that there is a $1,100 debit balance in Allowance for Doubtful Accounts. What amount of bad debt expense will Pharoah record? Bad debts expense

Answer 1

a)

Bad debt expense = $36,900

b)

Bad debt expense = Accounts receivable x % estimated as uncollectible - Existing credit balance in allowance for doubtful accounts

= 691,500 x 4% - 3,300

= $24,360

c)

Bad debt expense = Accounts receivable x % estimated as uncollectible + Existing debit balance in allowance for doubtful accounts

= 691,500 x 4% + 1,100

= $28,760

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