Question

Bradford Plumbing had the following data for a recent year: Credit sales $547,900 Allowance for doubtful accounts, 1/1 (a credit balance) 8,740 Accounts receivable, 1/1 42,340 Collections on account receivable 489,770 Accounts receivable written off 14,250 Bradford estimates that 1.9% of credit sales will eventually default. Required: 1. Compute bad debt expense for the year (rounding to the nearest whole number). $ 2. Determine the ending balances in accounts receivable and allowance for doubtful accounts. Ending Balance Accounts receivable $ Allowance for doubtful accounts $

Answer 1

1	Bad debt expense	=	Credit sales X Estimated bad debts percentage
		=	$547900 X 1.90%
		=	$       10,410
2	Ending Balance of Accounts receivables:
	Beginning balance	=	$       42,340
Add:	Sales	=	$   5,47,900
Less:	Collections	=	$   4,89,770
Less:	Amount write off	=	$       14,250
	Ending Balance	=	$       86,220
	Ending Balance of Allowance for doubtful accounts:
	Beginning balance	=	$         8,740
Add:	Bad debt expense	=	$       10,410
Less:	Amount write off	=	$       14,250
	Ending Balance	=	$         4,900