The following information relates to a company’s accounts receivable: gross accounts receivable balance at the beginning...
The following information relates to a company’s accounts receivable: gross accounts receivable balance at the beginning of the year, $310,000; allowance for uncollectible accounts at the beginning of the year, $20,000 (credit balance); credit sales during the year, $1,000,000; accounts receivable written off during the year, $11,000; cash collections from customers, $900,000. Assuming the company estimates bad debts at an amount equal to 2% of credit sales.
1. Calculate bad debt expense for the year.
2. Calculate the year-end balance in the allowance for uncollectible accounts.
The following information relates to a company’s accounts receivable: gross accounts receivable balance at the beginning of the year, $310,000; allowance for uncollectible accounts at the beginning of the year, $20,000 (credit balance); credit sales during the year, $1,000,000; accounts receivable written off during the year, $11,000; cash collections from customers, $900,000. Assuming the company estimates bad debts at an amount equal to 2% of credit sales.
1. Calculate bad debt expense for the year.
2. Calculate the year-end balance in the allowance for uncollectible accounts.
Homework Answers
Solution 1:
Bad debt expense for the year = credit sales*2% = $1,000,000* 2% = $20,000
Solution 2:
Year-end balance in the allowance for uncollectible accounts= beginning balance - written off + bad debt expense for the year
= $20000 - $11000 + $20000 = $29,000
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