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Calculating Bad Debt Expense Using the Example of Wellington Corp.

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Wellington Corp. has outstanding accounts receivable totaling $6.5 million as of Dec. 31 and sales on credit during the year of $24 million. There is also a credit balance of $12,000 in the allowance for doubtful accounts. If the company estimates that 8% of its outstanding receivables will be uncollectible, what will be the amount of bad debt expense recognized for the year?

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Solution Summary

The solution includes 1 reference. The expert calculates bad debt expenses using the example of Wellington Corp.

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The formula to figure this problem out would be:

(Total A/R x estimate for uncollectible accounts) - credit ...

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