Question

Mills Corporation's balance sheet included the following information: Accounts Receivable $510,000 Less: Allowance for Doubtful Accounts 66,000 Accounts Receivable, Net of Allowance $444,000 If the Allowance account had a credit balance of $28,000 immediately before the year-end adjustment for bad debts and no accounts were written-off or allowed for during the year, what was the amount of Bad Debt Expense recognized during the year

Answer 1

38,000

Step-by-step explanation:

Account receivable = 510,000

net allowance = 444,000

66,000

credit balance = - 28,000

= 38,000

Answer 2

$38,000

Step-by-step explanation:

When a company makes sales on account, debit accounts receivable and credit sales. Based on assessment, some or all of the receivables may be uncollectible.

To account for this, debit bad debit expense and credit allowance for doubtful debt.

Given that no accounts were written-off or allowed for during the year, the amount of bad debt expense recognized during the year is equivalent to the movement in the allowance account before and after the year end adjustments.

The amount of Bad Debt Expense recognized during the year

= $66,000 - $28,000

= $38,000