Question

Johnson Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense E7-10 Uncollectible is established as a percentage of credit sales. For 2018, net credit sales totaled $4,500,000, and the estimated bacd accounts; allowance method vs. direct Required debt percentage is 1.5%. The allowance for uncollectible accounts had a credit balance of$42.000 at the beginning of 2018 and $40,000, after adjusting entries, at the end of 2018. wite-off method 1. What is bad debt expense for 2018 as a percent of net credit sales? L07-5,L07-6 2. Assume Johnson makes no other adjustment of bad debt expense during 2018. Determine the amount of accounts receivable written off during 2018. 3. If the company uses the direct write-off method, what would bad debt expense be for 2018?

Answer 1

1.

Net credit sales = $4,500,000

Bad debt expense = 1.5%

Hence, bad debt expense = 4,500,000 x 1.5%

= $67,500

2.

Dr. Allowance for uncollectible accounts Cr.

Accounts receivable (Bal. fig.)	69,500	Balance b/d	42,000
Balance c/d	40,000	Bad debt expense	67,500
	109,500		109,500

Hence, the amount of accounts receivable written off during 2018 = $69,500

3.

If the company uses direct write-off method, bad debt expense for 2018 will be $67,500 i.e. 1.5% of $4,500,000