Question
In: Accounting
Ervin Company uses the allowance method to account for uncollectible accounts receivable
Ervin Company uses the allowance method to account for
uncollectible accounts receivable. Bad debt expense is established
as a percentage of credit sales. For 2021, net credit sales totaled
$5,900,000, and the estimated bad debt percentage is 1.50%. No
previously written-off accounts receivable were reinstated during
2021. The allowance for uncollectible accounts had a credit balance
of $56,000 at the beginning of 2021 and $47,000, after adjusting
entries, at the end of 2021.
Required:
1. What is bad debt expense for 2021 as a percent of net
credit sales?
2. Assume Ervin makes no other adjustment of bad
debt expense during 2021. Determine the amount of accounts
receivable written off during 2021.
3. If the company uses the direct write-off
method, what would bad debt expense be for 2021?
Solutions
Expert Solution
1) Bad debt expense = 5900000*1.5% = 88500
2) Amount written off = 56000+88500-47000 = 97500
3) Bad debt expense (Direct method) = $97500
ekkarill92 answered 2 years agoRelated Solutions
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