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The Manda Panda Company uses the allowance method to account for bad debts. At the beginning...

The Manda Panda Company uses the allowance method to account for bad debts. At the beginning of 2016, the allowance account had a credit balance of $5,796. Credit sales for 2016 totaled $479,685 and the year-end accounts receivable balance was $40,234. During this year, $5,429 in receivables were determined to be uncollectible and were written off. Manda Panda anticipates that 2% of all credit sales will ultimately become uncollectible.

What is the balance in the allowance for bad debts Manda Panda should report in its 12/31/16 Balance Sheet? $____

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Answer #1

Calculation of balance in the allowance for bad debts accounts reported in the balance sheet of Manda Panda as on 12/31/16:

Beginning balance in Allowance Account = $5796 Credit

Bad debts = $5429

Anticipated uncollectible amount = $479685*2% = $9593.7

Balance in the Allowance for bad debts accounts as on 12/31/16 =

Credit Balance in Allowance Account - Bad debts + Anticipated uncollectible amount

= $5796 - $5429 + $9593.7 = $9960.7

Balance in the allowance for bad debts that Manda Panda should report in its 12/31/16 Balance Sheet = $9960.7

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