Question

B company sold 100,000 units on credit during 2019. The company estimates that 1% of net credit sales will become uncollectible. The net credit sales for 2019 are $800,000. It began the year with an $1,700 balance in its allowance for bad debts and end the year with an $6,700 balance. The company’s accountant reported bad debts expense on the income statement and tax form of $8,000

is this the correct reported bad debts expense on the income statement? or not

Answer 1

No, this is not the correct reported bad debts expense on the income statement

bad debt expense are those which are debited and allowance for doubtful account is credited to get desired closing balance.

ending allowance for bad debt = beginning balance+bad debt-uncollectibles

uncollectibles= $800,000*1%

=$8,000

$6,700 =$1,700+X -$8,000

=$13,000

Thus, bad debt expense to be reported on income statement is $13,000.

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