Question

Calistoga Produce estimates bad debt expense at 0.30% of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $483,000 and $1,490 respectively, at December 31, 2020. During 2021, Calistoga's credit sales and collections were $323,000 and $306,000, respectively, and $1,840 in accounts receivable were written off. Calistoga's final balance in its allowance for uncollectible accounts at December 31, 2021, is:

Answer 1

$619

Step-by-step explanation:

Given that,

Estimated bad debt expense = 0.30% of credit sales

Accounts receivable at December 31, 2020 = $483,000

Allowance for uncollectible accounts at December 31, 2020 = $1,490

Credit sales during 2021 = $323,000

Collections = $306,000

Accounts receivable were written off = $1,840

Bad debt expense during 2021:

= 0.30% of credit sales

= 0.0030 × $323,000

= $969

Therefore, the final balance in its allowance for uncollectible accounts at December 31, 2021, is determined by deducting the amount of accounts receivable written off and by adding the bad debt expense.

Final balance in its allowance for uncollectible accounts at December 31, 2021,:

= Opening balance in allowance for uncollectible accounts at January 1, 2021 + Bad debt expense during 2021 - Account receivable written off

= $1,490 + $969 - $1,840

= $619