Question

Allowance Method The Huntington Company, which has been in business for three years, makes all of its sales on account and does not offer cash discounts. The firm's credit sales, collections from customers, and write-offs of uncollectible accounts for the three-year period are summarized below:

Year	Sales	Collections	Accounts Written Off
2012	$640,000	$574,000	$4,200
2013	810,000	760,000	6,700
2014	880,000	844,400	7,300

Required
If the Huntington Company had used the allowance method of recognizing credit losses and had provided for such losses at the rate of 1.2 percent of credit sales, what amounts in Accounts Receivable and the Allowance for Doubtful Accounts would appear on the firm's balance sheet at the end of 2014? What total amount of bad debts expense would have appeared on the firm's income statement during the three year period?

Balance in Accounts Receivable at year end, 2014	Answer
Allowance for Doubtful Accounts Balance at year end 2014	Answer
Bad Debts Expense	Answer

Answer 1

Year	Expense Actually Reported	Expense Based on Estimate	Increase (Decrease) in Amount of Expense	Balance of allowance account
2012	$                     4,200	$             7,680	$             3,480	$           3,480
2013	$                     6,700	$             9,720	$             3,020	$           6,500
2014	$                     7,300	$           10,560	$             3,260	$           9,760

Balance in Accounts Receivable at year end, 2014 = $640000-574000-4200+810000-760000-6700+880000-844400-7300 = $133400
Allowance for Doubtful Accounts Balance at year end 2014 = $9760

Bad Debt Expense = $7680+9720+10560 = $27960