Estimating Bad Debts from Receivables Balances The following information is extr

Question

Estimating Bad Debts from Receivables Balances

The following information is extracted from Shelton Corporation's accounting records at the beginning of 2013: Accounts Receivable $64,000 Allowance for Doubtful Accounts 2,000 (credit) During 2013, sales on credit amounted to $582,000, $555,900 was collected on outstanding receivables and $2,900 of receivables were written off as uncollectible. On December 31, 2013, Shelton estimates its bad debts to be 4% of the outstanding gross accounts receivable balance.

Explanation / Answer

Balance of Account receivable as on 31st December 2014 $ Opening bal            64,000 Add:- Sales          582,000 Less:- Collection        -555,900 Less:- Bad debts             -2,900 Closing bal            87,200 Bad Debt Provision- closing               3,488 @ 4% Less :- Opening prov               2,000 Additional Provision to be made               1,488

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