How do you calculate bad debt expense and what do you do with it in relation...

How do you calculate bad debt expense and what do you do with it in relation to an account recieveable account. What numbers go in allowance for doubtful accounts

Expert Solution

Basically there are methods to calculat the bad-debts expense for example
1	Percentage of credit sales
2	Percentage of accounts receivable
3	bad-debts calculated based on aging schedule of accounts receivable

However, whichever method is choosen the accounting treatment remains the same, once
you determines the bad-debts expense


The following Journal entries are passed in relation to bad-debts and accounts receivable

General Journal		Debit	Credit
Bad-debts expense		XX
	Allowance for Doubtful accounts		XX
To record the bad -debts expense for the year


Allowance for Doubtful accounts		XX
	Accounts receivable		XX
To record the written off as uncollectible


Cash		XX
	Accounts receivable		XX
Accounts receivable		XX
	Allowance for Doubtful accounts		XX
To record the collection of accounts previous written off

And finally the accounts receivable is presented in belowmentioned way.

Gross amount of Accounts receivable		XX
Less : Allowance for doubt debts		XX
Carrying amount of accounts receivable	Net	XX

ekkarill92 answered 3 years ago

Compare and contrast the two methods for estimating bad debt expense. Explain which method do you...

Compare and contrast the two methods for estimating bad debt expense. Explain which method do you think gives a better representation of current bad debts.

how will an increase in bad debt expense affect RNOA? how will a customer paying off...

how will an increase in bad debt expense affect RNOA? how will a customer paying off accounts receivable affect RNOA?

For company's that use the Allowance method, why do they calculate and journalize bad debts expense?...

For company's that use the Allowance method, why do they calculate and journalize bad debts expense? (Hint: think about some of the GAAP principles learned in Chapter 1 and Chapter 3.) In your opinion, what is the trickiest part of Chapter 8. Explain.

Mel's Hardware uses the allowance method to determine their bad debt expense. The allowance for bad...

Mel's Hardware uses the allowance method to determine their bad debt expense. The allowance for bad debts is based on the balance in the accounts receivable account. Mel's hardware uses the rate of 0.75% of accounts receivable to determine the appropriate balance in the allowance for doubtful accounts. The data collected from Mel's Hardware is as follows. A/R: $49,477.00 Allowance for doubtful accounts: debit $350.00 Credit sales: $144,554.00 Bad Debt Expense: -0-

Why not make the following entry when recording bad debt expense for the period? Dr. Bad...

Why not make the following entry when recording bad debt expense for the period? Dr. Bad debt expense, Cr. Accounts receivable

1)Company XYZ had total credit sales of $1,235,000. Calculate bad debt expense assuming the company estimates...

1)Company XYZ had total credit sales of $1,235,000. Calculate bad debt expense assuming the company estimates bad debt at 1% of sales made during the year (using the income statement approach). Record the journal entry to record the bad debt estimation. Accounts Debit Credit [ Select ] ["Bad Debt Expense", "Accounts Receivable", "Allowance for Doubtful Accounts", "Cash"] ...

What are the pros and cons of extending credit? Define net realizable value. Bad debt expense...

What are the pros and cons of extending credit? Define net realizable value. Bad debt expense should be recorded in same period as the sale to avoid violating the expense recognition (matching) principle. Under the allowance method an estimate of the bad debts are recorded and later adjusted. Describe the following two steps of the allowance method and provide the required journal entries. Adjust for estimated bad debts Remove (write off) specific customer balances Small companies are allowed to use...

The allowance method will provide an estimate for bad debt expense, as well as estimate the...

The allowance method will provide an estimate for bad debt expense, as well as estimate the balance for the allowance contra account to accounts receivable. How will the items affect the income and balance sheet? For example, how will changing the aging category data affect the accuracy and reliability of information reported? Will the balance sheet accounts be accurate if they are over/understated? How will the over/understatement of expenses, for example, affect the income statement?

The risk of patients not paying their account balances resulting in bad debt expense is a...

The risk of patients not paying their account balances resulting in bad debt expense is a reality today. This risk is greater as employers increase out-of-pocket maximums, deductibles, and co-pays as part of their medical insurance plans. Research and discuss some best practices healthcare organizations are using today to improve their patient liability or balance due collection process.

Daley Company prepared the following aging of receivables: Bad Debt Expense

Daley Company prepared the following aging of receivables analysis at December 31. Days Past Due Total01 to 3031 to 6061 to 90Over 90Account receivables670000416000110000560003800050000% uncollectible 3%4%7%9%12%Requirements:a. Complete the table below to calculate the estimated balance of Allowance for Doubtful Accounts using aging of accounts receivable.b. Prepare the adjusting entry to record bad debts expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $5,600 credit.c. Prepare the adjusting entry to record...

Question