Question

Allowance for Doubtful Accounts, showed a credit balance of $950 on January 1, 2004. During the year, the company wrote off $3,200 of uncollectible accounts, and reinstated $1,300 of previously written off accounts. The Dec 31, 2004 balance of Accounts Receivable is $97,500, and 6% of outstanding accounts receivable are assumed to be uncollectible. What will be the company's Bad Debts Expense for 2004

Answer 1

Bad debts expense = $6,800

Step-by-step explanation:

Estimated bad debts = $97,500 * 6%

Estimated bad debts = $5,850

Allowance for doubtful accounts

Wrote off $3,200 Opening Balance $950

Reinstated $1,300

Adjustment $6,800

Closing balance $5,850

Bad debts expense = $6,800