Question

Question 5 Information related to Metlock Company for 2019 is summarized below. Total credit sales Accounts receivable at December 31 Bad debts written off $2,556,000 904,000 32,200 (a) What amount of bad debt expense will Metlock Company report if it uses the direct write-off method of accounting for bad debts? (b) Assume that Metlock Company estimates its bad debt expense based on 6% of accounts receivable. What amount of bad debt expense will Metlock record if it has an Allowance for Doubtful Accounts credit balance of $2,800? (c) Assume that Metlock Company estimates its bad debt expense based on 6% of accounts receivable. What amount of bad debt expense will Metlock record if it has an Allowance for Doubtful Accounts debit balance of $2,800?

Answer 1

a. Bad debt expense = $32,200

b. Bad debt expense = Accounts receivables x percentage estimated as uncollectible - Existing credit balance in allowance for doubtful accounts

= 904,000 x 6% - 2,800

= $51,440

c.

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

= 904,000 x 6% + 2,800

= $57,040

Kindly comment if you need further assistance. Thanks‼!