At January 1, 2020, the credit balance of Sarasota Corp.’s Allowance for Doubtful Accounts was $409,000. During 2020, th...
At January 1, 2020, the credit balance of Sarasota Corp.’s Allowance for Doubtful Accounts was $409,000. During 2020, the bad debt expense entry was based on a percentage of net credit sales. Net sales for 2020 were $80 million, of which 89% were on account. Based on the information available at the time, the 2020 bad debt expense was estimated to be 0.80% of net credit sales. During 2020, uncollectible receivables amounting to $505,500 were written off against the allowance for doubtful accounts. The company has estimated that at December 31, 2020, based on a review of the aged accounts receivable, the allowance for doubtful accounts would be properly measured at $531,000.
Question:
Prepare a schedule calculating the balance in Sarasota Corp.’s Allowance for Doubtful Accounts at December 31, 2020.
Homework Answers
| Allowance for
Doubtful Accounts at December 31, 2020 |
|
| Beginning Balance | $409,000 |
| Add: Allowance for the bad debt expense (8000000*89%*0.80%) | 56960 |
| Less: Written off | (505500) |
| Add: Allowance during the year (Balancing figure) | 570540 |
| Balance as on December 31, 2020 | $531,000 |
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