Question

Mills Corporation's balance sheet included the following information:

Accounts Receivable $520,000
Less: Allowance for Doubtful Accounts 67,000
Accounts Receivable, Net of Allowance $453,000

If the Allowance account had a credit balance of $28,500 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

$38,500

Step-by-step explanation:

Data provided

Allowance Receivable = $520,000

Accounts Receivable, Net of Allowance = $453,000

Credit balance = $28,500

The computation of Bad Debt Expense is shown below:-

Bad Debt Expense = Allowance Receivable - Accounts Receivable, Net of Allowance - Credit balance

= $520,000 - $453,000 - $28,500

= $38,500

So, for computing the bad debt expenses we simply applied the above formula.