Question

The following information is available for Waterway Industries:

Allowance for doubtful accounts at December 31, 2019 $23900
Credit sales during 2020 1340000
Accounts receivable deemed worthless and written off during 2020 25900
As a result of a review and aging of accounts receivable in early January 2021, it has been determined that an allowance for doubtful accounts of $16300 is needed at December 31, 2020.
Required:
(A) What amount should Waterway record as "bad debt expense" for the year ended December 31, 2020?

Answer 1

$18,300

Step-by-step explanation:

The calculation of bad debt expense is given below:-

Bad debt expense = Bad debt expense balance required + Bad debt written off from accounts receivable - Existing bad debt allowance balance

= $16,300 + $25,900 - $23,900

= $42,200 - $23,900

= $18,300

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