Question

Coronado Industries has outstanding accounts receivable totaling $6.17 million as of December 31 and sales on credit during the year of $28.4 million. There is also a debit balance of $12500 in the allowance for doubtful accounts. If the company estimates that 7% of its outstanding receivables will be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense

Answer 1

$431,900

Step-by-step explanation:

The computation of the balance in the allowance for doubtful accounts after the year-end adjustment is shown below;

= Outstanding account receivable × estimated percentage

= $6,170,000 × 7%

= $431,900

By multiplying the outstanding account receivable with the estimated percentage we can get the balance in allowance for doubtful accounts so that the bad debt expense could be recorded