Question

Flyer Company has provided the following information prior to any year-end bad debt adjustment: Cash sales, $169,000 Credit sales, $469,000 Selling and administrative expenses, $129,000 Sales returns and allowances, $49,000 Gross profit, $509,000 Accounts receivable, $295,000 Sales discounts, $33,000 Allowance for doubtful accounts credit balance, $3,100 Flyer prepares an aging of accounts receivable and the result shows that 3% of accounts receivable is estimated to be uncollectible. What is the balance in the allowance for doubtful accounts after bad debt expense is recorded

Answer 1

$5,750

Step-by-step explanation:

The computation of the balance in the allowance for doubtful accounts after bad debt expense is shown below:

= Account receivable × estimated percentage - credit balance of Allowance for doubtful accounts

= $295,000 × 0.03 - $3,100

= $8,850 - $3,100

= $5,750

By deducting the credit balance from the estimated amount we can find out the balance in the allowance for doubtful accounts