Explore BrainMass

# Bad Debt and Uncollectible Accounts

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

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.

#### 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