Question

A company reported the following in its recent balance sheet:

Accounts payable $19,397
Accounts receivable $81,526
Cash $73,514
Income tax payable $3,702
Inventories $26,006
Long-term liabilities $1,899
Property and equipment $56,028
Stockholders' Equity $204,708
Supplies $5,702
Wages payable $13,070
What is the amount of the current ratio (round to two decimal places)?
5.16

Suppose that the balance of a company's Allowance for Uncollectible Accounts was $6,200 (credit) at the end of 2015, prior to any adjustments. The company estimated that the total of uncollectible accounts in its accounts receivable was $44,300 at the end of 2015. What amount of bad debt expense would appear in the company's 2015 income statement?

Answer 1

A) Current Ratio = 186,748 / 36,169 = 5.16

B) Bad Debt Expense = 38,100

Step-by-step explanation:

A - By ordering the accounts, the Balance Sheet is as follows:

1. ASSET

1.1. CURRENT ASSET – 186,748

1.1.1. Cash 73,514

1.1.2. Accounts receivable 81,526

1.1.3. Inventories 26,006

1.1.4. Supplies 5,702

1.2. LONG-TERM ASSET

1.2.1.Property and equipment 156,028

TOTAL ASSET: 242,776

2. LIABILITIES

2.1. CURRENT LIABILITIES – 36,169

2.1.1. Accounts payable 19,397

2.1.2. Income tax payable 3,702

2.1.3. Wages payable 13,070

2.2. LONG-TERM LIABILITIES

2.2.1. Long-term liabilities 1,899

3. STOCKHOLDERS´EQUITY

3.1.1. Stockholders' Equity 204,708

TOTAL L + SE: 242,776

Current Ratio = Current Asset (CA) / Current Liabilities (CL)

Current Ratio = 186,748 / 36,169 = 5.16

B – The Allowance for Uncollectible Accounts has a balance of 6,200 (credit), but the balance should be of 44,300 (credit), therefore, it must be increased in 38,100 (Credit) against Bad Debt Expense (Debit) for the same amount.