On July 31, 2014, D’Amico Management Inc. reported the following account balance
ID: 2451206 • Letter: O
Question
On July 31, 2014, D’Amico Management Inc. reported the following account balances in its financial statements:
Accounts receivable............................................................. $ 960,000
Allowance for doubtful accounts......................................... $ 82,000
Bad debt expense................................................................. $ 78,000
During Aug 1 and Dec 31, 2014, D’Amico Management Inc. had the following transactions related to receivables, which occurred in order: The company prepares financial statements annually.
a. Sales were $4,000,000, of which $3,200,000 were on account.
b. Collections of accounts receivable were $3,100,000.
c. Write-offs of accounts receivable were $80,000.
d. Recoveries of accounts previously written off as uncollectible were $5,000.
1. Assume that D’Amico Management Inc. estimates its Bad Debt Expense based on an Aging Analysis of its year-end Account Receivable, which indicates that$40,000 is the desired ending balance for the Allowance for Doubtful account.
a. What amount of Bad Debt Expense will the company record for 2014 if it has a credit balance of $82,000 on July 31, 2014 in its Allowance for Doubtful Accounts?
b. What amount of Bad Debt Expense will the company record for 2014 if it has a debit balance of $82,000 on July 31, 2014 in its Allowance for Doubtful Accounts?
Explanation / Answer
a)
b)
Particulars amount Particulars amount By Balance b/d $82,000 To Accounts W/off $207,000 By Bad Debts $80,000 By Accounts Receivable $5,000 By Balance c/d $40,000 $207,000 $207,000Related Questions
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