Assume that Simple Co. had credit sales of $241,000 and cost of goods sold of $1

Question

Assume that Simple Co. had credit sales of $241,000 and cost of goods sold of $141,000 for the period. Simple uses the aging method and estimates that the appropriate ending balance in the Allowance for Doubtful Accounts is $2,100. Before the end-of-period adjustment is made, the Allowance for Doubtful Accounts has a credit balance of $160.

Assume that Simple Co. had credit sales of $241,000 and cost of goods sold of $141,000 for the period. Simple uses the aging method and estimates that the appropriate ending balance in the Allowance for Doubtful Accounts is $2,100. Before the end-of-period adjustment is made, the Allowance for Doubtful Accounts has a credit balance of $160.

Explanation / Answer

The amount of the bad debts which the company will record as an end-of-period adjustment will be $160 only because we will not consider the estimation taken for the allowance for doubtful accounts.

Also we are assuming that all the credit sales are recovered and there are no bad debts.

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