Question

The Allowance for Bad Debts account has a credit balance of $ 5 comma 000$5,000 before the adjusting entry for bad debts expense. Theâ company's management estimates that 22â% of net credit sales will be uncollectible for the year 2019. Net credit sales for the year amounted to $ 260 comma 000$260,000. What will be the balance of Allowance for Bad Debts on the Decemberâ 31, 2019 balanceâ sheet?

Answer 1

62,200

Step-by-step explanation:

The Allowance for Bad Debts account has a credit balance of $5,000 before the adjusting entry for bad debts expense. The company's management estimates that 22% of net credit sales will be uncollectible for the year 2019. Net credit sales for the year amounted to $260,000. The balance of Allowance for Bad Debts on the December 31, 2019 balance sheet would be 62,200.

Answer 2

62,200 allowance ending

Step-by-step explanation:

allownce 5,000 credit

Because the bad debt is calculate over the sales, the bad debt expense is the result of that estimated, without considering the beginning balance of the allowance.

22% of net credit sales will be uncollectible:

260,000 x 22% = 57,200

Now ending balance will be beginning + uncollectible for the period

5,000 beginning

57,200 uncollectible for the period

62,200 allowance ending