Question

Jay Inc. estimates uncollectible accounts using the percentage-of-receivables method and expects that 3.5% of outstanding receivables will be uncollectible for 2016. The balance in Accounts Receivable is $243,000, and the Allowance for Doubtful Accounts has a credit balance of $4,300 before adjustments at year-end. The Bad Debt Expense for 2016 will be:

Select one:

a. $8,505

b. $5,423

c. $4,205

d. $4,300

Answer 1

c. $ 4,205

Step-by-step explanation:

Computation of Estimated uncollectible accounts

Accounts Receivable balance $ 243,000

Percentage of outstanding receivable considered uncollectible 3.5 %

Uncollectible accounts balance = $ 243,000 * 3.5 % $ 8,505

Existing balance in uncollectible account $ ( 4,300)

Bad debts expense for the year $ 4,205