The following information relates to a company’s accounts receivable: accounts r

Question

The following information relates to a company’s accounts receivable: accounts receivable balance at the beginning of the year, $300,000; allowance for uncollectible accounts at the beginning of the year, $25,000 (credit balance); credit sales during the year, $1,500,000; accounts receivable written off during the year, $16,000; cash collections from customers, $1,450,000. Assuming the company estimates that future bad debts will equal 10% 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 receivable ending balance=300000+1500000-16000-1450000= $334000 1 Year-end balance in the allowance for uncollectible accounts=334000*10%=$33400 2 Bad debt expense=33400-(25000-16000)= $24400

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