Question

Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2021, accounts receivable totaled $715,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $50,000 at the beginning of 2021 and $30,000 in receivables were written off during the year as uncollectible. Also, $3,000 in cash was received in December from a customer whose account previously had been written off. The company estimates bad debts by applying a percentage of 15% to accounts receivable at the end of the year.

1. Record bad debt expense for the year.

2. How would accounts receivable be shown in the 2021 year-end balance sheet?

Answer 1

Estimated allowance for uncollectible accounts, Ending balance ($715,000*15%)		$   107,250
Less: Allowance for uncollectible accounts, Before adjustments
Allowance for uncollectible accounts, beginning balance	$   50,000
Less: Written off during the year	$   30,000
Add: Cash received from written off	$     3,000
Allowance for uncollectible accounts, Before adjustments		$     23,000
Baddebt expenses for the year		$     84,250

2.

Accounts receivable	$    715,000
Less: Allowance for doubtful accounts	$ (107,250)
Accounts receivable to be shown in balance sheet	$    607,750

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