Question

Sheffield Corp. had a 1/1/20 balance in the Allowance for Doubtful Accounts of $34500. During 2020, it wrote off $21600 of accounts and collected $5740 on accounts previously written off. The balance in Accounts Receivable was $630000 at 1/1 and $730000 at 12/31. At 12/31/20, Sheffield estimates that 7% of accounts receivable will prove to be uncollectible. What is Bad Debt Expense for 2020?

Answer 1

The correct answer is $32,460.

Step-by-step explanation:

According to the scenario, the computation of the given data are as follows:

Total uncollectible amount on 12/31/20 = $730,000 × 7%

= $51,100

So, now we can calculate the total bad debt expense by using following formula:

Bad debt expense = Total uncollectible - Allowance for doubtful Acc. + Amount wrote off

By putting the value, we get

Bad debt expense = $51,100 - $34,500 + ( $21,600 - $5,740)

= $51,100 - $34,500 + $15,860

= $32,460