Question

Johnson Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is established as a percentage of credit sales. For 2018, net credit sales totaled $6,400,000, and the estimated bad debt percentage is 1.40%. The allowance for uncollectible accounts had a credit balance of $61,000 at the beginning of 2018 and $49,500, after adjusting entries, at the end of 2018. Required: 1. What is bad debt expense for 2018 as a percent of net credit sales? 2. Assume Johnson makes no other adjustment of bad debt expense during 2018. Determine the amount of accounts receivable written off during 2018. 3. If the company uses the direct write-off method, what would bad debt expense be for 2018?

Answer 1

Req 1.
Bad debts expense:
Net credit sales			64,00,000
Multiply: % of uncollectible		1.40%
Bad debts expense:			89600
Req 2.
Amount written off as bad:
Beginning balance of Allowance		61000
Add: Bad debts expenses		89600
Subtotal				150600
Less: Ending balance of Allowance	49500
Amount written off as bad:		101100
Req 3.
Bad debts expense under Direct write off:	1,01,100