Question

The following information relates to a company’s accounts receivable: accounts receivable balance at the beginning of the year, $440,000; allowance for uncollectible accounts at the beginning of the year, $33,000 (credit balance); credit sales during the year, $1,650,000; accounts receivable written off during the year, $24,000; cash collections from customers, $1,800,000. Assuming the company estimates that future bad debts will equal 11% of the year-end balance in accounts receivable.

1. Calculate the year-end balance in the allowance for uncollectible accounts.

2. Calculate bad debt expense for the year.

Answer 1

• Working

	Accounts receivables	Allowance for Uncollectible accounts
Beginning balance	$440,000.00	$33,000.00
Credit Sales	$1,650,000.00
Accounts written off	($24,000.00)	($24,000.00)
Cash collection	($1,800,000.00)
Ending balances	$266,000.00	$9,000.00

• Requirement 1

Year end balance in the allowance for uncollectible accounts = 11% of accounts receivables
= $ 266,000 x 11% = $ 29,260 Credit = Answer

• Requirement 2

Bad Debt Expense = $ 20,260

Working for above answer

A	Year End balance of Accounts receivables	$266,000.00
B = A x 11%	Adjusted balance of Allowance account required	$29,260.00
C	Unadjusted balance of Allowance account	$9,000.00
D = B - C	Bad Debt Expense for the year	$20,260.00