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    Bad Debt and Uncollectible Accounts

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    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 receivables written off during the year, $16,000; cash collections from customers, $1,450,000. Assuming the company estimates bad debts at an amount equal to 2% of credit sales, calculate the following:
    1. bad debt expense for the year
    2. year-end balance in the allowance for uncollectible accounts

    If the company estimates that future bad debts will equal 10% of the year-end balance in accounts receivable, calculate the following:
    1. bad debt expense for the year
    2. year-end balance in the allowance for uncollectible accounts.

    © BrainMass Inc. brainmass.com June 4, 2020, 1:17 am ad1c9bdddf
    https://brainmass.com/business/accounting/bad-debt-uncollectible-accounts-391511

    Solution Preview

    A. Based on percent of credit sales
    1. Bad debt expense is directly calculated based on the percent of credit sales. Total credit sales = 1,500,000. Percentage = 2%
    Bad debt expense = 1,500,000 X 2% = $30,000
    2. The opening balance in allowance account = ...

    Solution Summary

    The solution calculates bad debt and uncollectible accounts.

    $2.19

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