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.
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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