Question

Vaststrom Company had the following data for the year. Accounts receivable, beginning of year $75,000 Allowance for bad debts, beginning of year 15,000 Cash collected from credit customers 415,000 Credit sales for the year 434,000 Accounts receivable, end of year 90,000 Allowance for bad debts, end of year 26,500 What was Vaststrom Company’s BAD DEBT EXPENSE for the year?

Answer 1

$7,500

Step-by-step explanation:

First we must determine the bad debt write offs using the following formula:

write offs = (new credit sales - cash collections) - (ending accounts receivables - beginning accounts receivables)

write offs = ($434,000 - $415,000) - ($90,000 - $75,000) = $19,000 - $15,000 = $4,000

To calculate the bad debt expense we can use the following formula:

bad debt expense = ending bad debt balance - (beginning allowance for bad debt + write offs)

bad debt expense = $26,500 - ($15,000 + $4,000) = $26,500 - $19,000 = $7,500