On January 1, 2018, the Accounts Receivable and the Allowance for Doubtful Accou

Question

On January 1, 2018, the Accounts Receivable and the Allowance for Doubtful Accounts balances of Kendall Company were $40,000 and $1,500 respectively. During the year 2018, the company reported $80,000 of credit sales, and collected $78,200 cash from receivables. The company also wrote off $500 of receivables as uncollectible in 2018. The company estimates that it will be unable to collect 4% of the year-end accounts receivable balance.

Determine the amount of bad debts expense to be recognized in the 2018 income statement.

Explanation / Answer

Calculate bad debt expense

Year end account receivable = 40000+80000-78200-500 = 41300

Allowance for doubtful account balance year end = 41300*4% = 1652

Bad debt expense = 1652-1500 = 152

So answer is a) $152

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