Vaughn Manufacturing has outstanding accounts receivable totaling $6.47 million as of December 31 and sales on...
Vaughn Manufacturing has outstanding accounts receivable totaling $6.47 million as of December 31 and sales on credit during the year of $24.5 million. There is also a credit balance of $11500 in the allowance for doubtful accounts. If the company estimates that 6% of its outstanding receivables will be uncollectible, what will be the amount of bad debt expense recognized for the year?
Homework Answers
The amount of bad debt expense recognized for the year
The amount of bad debt expense recognized for the year = Total required allowance – Credit balance in allowance for doubtful accounts
= [Outstanding Accounts receivables x Percentage of uncollectibles] - Credit balance in allowance for doubtful accounts
= [$6,470,000 x 6.00%] - $11,500
= $388,200 - $11,500
= $376,700
“Hence, the amount of bad debt expense recognized for the year will be $376,700”
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