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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?

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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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