Question

The following information relates to a companyâs accounts receivable: gross accounts receivable balance at the beginning of the year, $330,000; allowance for uncollectible accounts at the beginning of the year, $22,000 (credit balance); credit sales during the year, $1,100,000; accounts receivable written off during the year, $13,000; cash collections from customers, $1,000,000. Assuming the company estimates that future bad debts will equal 10% of the year-end balance in accounts receivable.

Required:
a. Calculate the year-end balance in the allowance for uncollectible accounts.
b. Calculate bad debt expense for the year.

Answer 1

A. $41,700

B. $32,700

Step-by-step explanation:

a. Calculation to determine the year-end balance in the allowance for uncollectible accounts.

Beginning account receivable$330,000

Add Credit sale $1,100,000

Less Account receivable written off ($13,000)

Less Cash collected ($1,000,000)

Ending account receivable

$417,000

Year-end balance in the allowance for uncollectible accounts $41,700

($417,000 * 10%)

Therefore the year-end balance in the allowance for uncollectible accounts will be $41,700

b. Calculation to determine the bad debt expense for the year

Account receivable written off $13 000

Add Year-end balance in the allowance for uncollectible accounts $41,700

Less Beginning balance in the allowance for uncollectible accounts ($22,000)

Bad Debt Expense $32,700

Therefore the bad debt expense for the year will be $32,700