Question

A company has ending accounts receivable of $600,000 and it estimates that uncollectible accounts will be 2% of accounts receivable. If Allowance for Doubtful Accounts has a credit balance of $1,000 prior to adjustment, bad debt expense will be:________.

Answer 1

$11,000

Step-by-step explanation:

The computation of the bad debt expense is shown below:

= Ending account receivable balance × estimated percentage - credit balance of Allowance for Doubtful Accounts

= $600,000 × 2% - $1,000

= $12,000 - $1,000

= $11,000

We simply applied the above formula to determine the bad debt expense by considering the all the information given in the question