Question

Grayhawk Company reported net credit sales of $588,000 for the year ending December 31, 2019. On...

Grayhawk Company reported net credit sales of $588,000 for the year ending December 31, 2019. On January 1, 2019, the Allowance for Doubtful Accounts had a credit balance of $14,400. During 2019, $24,000 of uncollectible accounts receivable were written off. Grayhawk has experienced bad debt losses of 3% of credit sales in prior periods. Using the percentage of credit sales method, what is the adjusted balance in the Allowance for Doubtful Accounts at December 31, 2019?

A) $17, 640

B) $8,400

C)$27,600

D) $8,040

Please include the formula I need to use to solve this type of problem.

Business   Accounting   
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Answer #1
Net credit sales for Grayhawk company $588,000
Bad debt expense = $588,000*3% 17640
the amount $24000is already charged as bad debt expense. .
The excess amount of 24000-17640 6360 Should be reduced from the beginning balance to arrive at ending balance
Therefore, Allowance for bad debts ending = Beginning - Excessive charged as bad debt.
14400-6360
8040
Option (d) is correct……………
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