Question

At the beginning of 2014, EZ Tech Company's Accounts Receivable balance was $140,000, and the balance in Allowance for Doubtful Accounts was $2,350 (Cr.). EZ Tech's sales in 2014 were 80% of which were on credit. Collections on account during the year were $670,000. The company wrote off $4,000 of uncollectible accounts during the year.

Required:
a. Compute the Accounts Receivable and Allowance for Doubtful Accounts T-accounts to determine the balance sheet values.
b. Compute the amounts related to Accounts Receivable and Bad Debt Expense that would be reported on the income statement for the current year.
c. Compute the amounts related to Accounts Receivable and Bad Debt Expense that would be reported on the balance sheet for the current year.

Answer 1

Account receivables

Debit Credit

140,000

840,000

670,000

4,000

306,000 Ending Balance

Allowance for doubtful account

Debit Credit

2,350

4,000

25,200

23,550

Bad debt expense for the year: 23,550

Account receivables in the balance sheet (net)

306,000 - 23,550 = 282,450

Step-by-step explanation:

*missing information: the sales were 1,050,000

so credit sales: 1,050,000 x 80% = 840,000

*missing information bad debt expense is 3% of credit sales

bad debt expense for the year:

840,000 x 3% = 25,200