Olson Corp. reported the following in the Current Assets section of its December

Question

Olson Corp. reported the following in the Current Assets section of its December 31, 2012,

balance sheet:

                                                                                      12/31/12                12/31/11

              Accounts receivable, net of allowances

               of $5,000 and $3,000, respectively                         $54,000                 $48,000

During 2012, Olson recorded $80,000 of sales on credit and wrote off $4,000 of uncollectible

accounts.

Required

1. Determine the amount of cash collected during 2012 from sales on credit.

2. Determine the amount of bad debts expense for 2012.

Explanation / Answer

1. Cash collected during 2012 from sales on credit = $80,000 - $4,000 = $76,000

2. Amount of bad debts = $5,000 + $3,000 = $8,000

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