Question

Line Drive Apparel has outstanding accounts receivable totaling $856,000 as of December 31 and sales on credit during the year of $3.4 million. There is also a debit balance of $12,000 in the allowance for doubtful accounts and the company estimates that 2% of its net credit sales will be uncollectible. what will be the balance in the bad debt expense account after the year-end adjustment to record bad debt expense?

Answer 1

balance = $7120

Step-by-step explanation:

given data

outstanding accounts receivable totaling = $856,000

sales on credit = $3.4 million

debit balance = $12,000

net credit sales = 2%

solution

we get here Allowance balance after all adjustment:

Allowance balance = Outstanding accounts receivable × Estimates percent of accounts receivable

Allowance balance = $856,000 × 2%

Allowance balance = $17120

balance in the bad debt expense account after the year-end adjustment is

balance = $17120 - debit balance

balance = $17120 - $12000

balance = $7120