Question

For 2021, Rahal's Auto Parts estimates bad debt expense at 1% of credit sales. The company reported accounts receivable and an allowance for uncollectible accounts of $86,500 and $2,100, respectively, at December 31, 2020. During 2021, Rahal's credit sales and collections were $404,000 and $408,000, respectively, and $2,340 in accounts receivable were written off. Rahal's 2021 bad debt expense is:

Answer 1

See

Step-by-step explanation:

Rahal's final balance in its allowance for uncollectible accounts at December 31, will be calculated as:

Step 1:

$404,400 × 1%

= $404,400 × 0.01

= $4,044

Step 2:

$2,100 - $2,340

= ($240)

Step 3:

$4,044 + ($240)

$3,804

Therefore, Rahal's final balance in its allowance for uncollectible accounts at December 31, 2021 is $3,804