Using the balance sheet approach : The following information relates to a compan

Question

Using the balance sheet approach:

The following information relates to a company’s accounts receivable: accounts receivable balance at the beginning of the year, $410,000; allowance for uncollectible accounts at the beginning of the year, $30,000 (credit balance); credit sales during the year, $1,500,000; accounts receivable written off during the year, $21,000; cash collections from customers, $1,400,000. Assuming the company estimates that future bad debts will equal 8% of the year-end balance in accounts receivable.

1. Calculate the year-end balance in the allowance for uncollectible accounts.

2. Calculate bad debt expense for the year.

Explanation / Answer

Accounts Receivables Op.balance 410000 Credit sales during the year 1500000 Written off during the year 21000 Cash collections from customers 1400000 Year end balance 489000 1910000 1910000 Allowance for uncollectible accounts Debit Credit Op.balance 30000 Written off during the year 21000 Bad debt expense for the year(bal.fig.) 30120 Year end balance-8% *489000 39120 60120 60120 1. Year-end balance in the allowance for uncollectible accounts = $ 39120                                     2. Bad debt expense for the year =       $ 30120

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