Question

Bonita Industries has outstanding accounts receivable totaling $1.27 million as of December 31 and sales on credit during the year of $6.46 million. There is also a debit balance of $5300 in the allowance for doubtful accounts. If the company estimates that 2% of its accounts receivable will be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense?

Answer 1

$25,400

Step-by-step explanation:

Provided outstanding Accounts Receivables = $1.27 million

Credit sales for the year = $6.46 million

Present balance of Allowance for Bad & Doubtful Debts = $5,300 Debit

Required provision or allowance = 2% of $1.27 million = $25,400

Since the balance of Allowance for Bad and Doubtful Debts is debit such balance shall also be made neutral as this account shows credit balance.

Therefore after year end adjustment the balance of Allowance for Doubtful Debts will be = $25,400

Entry will be credit of $25,400 + $5,300 = $30,700