Question

At December 31, Amy Jo's Appliances had account balances in Accounts Receivable of $314,000 and in Allowance for Uncollectible Accounts of $810 (credit) before any adjustments. An analysis of Amy Jo's December 31 accounts receivable suggests that the allowance for uncollectible accounts should be 4% of accounts receivable. Bad debt expense for the year should be:

Answer 1

$11,750

Explanation:

The computation of bad debt is shown below:-

Bad debt expense = Estimated allowance for uncollectible at the year end - Existing balance in allowance for uncollectible account credit balance

= ($314,000 × 4%) - $810

= $12,560 - $810

= $11,750

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