Question

# Johnson Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is...

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 \$6,500,000, and the estimated bad debt percentage is 1.50%. The allowance for uncollectible accounts had a credit balance of \$62,000 at the beginning of 2018 and \$50,000, 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)-The bad debt expense for 2018 as a percent of net credit sales is = \$97500.

Explanation- Bad debt expense for 2018 as a percent of net credit sales = \$6500000*1.5%

= \$97500

2)- The amount of accounts receivable written off during 2018 = \$109500.

Explanation- Accounts receivable written off = Beginning balance of allowance of uncollectible accounts+ Bad debts expense for 2018 -Ending balance of allowance of uncollectible accounts

= \$62000+\$97500-\$50000

= \$109500

3)- If the company uses the direct write-off method, bad debt expense would be for 2018 =\$109500.