The following information relates to a company’s accounts receivable: accounts r
ID: 2415001 • Letter: T
Question
The following information relates to a company’s accounts receivable: accounts receivable balance at the beginning of the year, $490,000; allowance for uncollectible accounts at the beginning of the year, $38,000 (credit balance); credit sales during the year, $1,900,000; accounts receivable written off during the year, $29,000; cash collections from customers, $2,050,000. Assuming the company estimates bad debts at an amount equal to 3% of credit sales.
The following information relates to a company’s accounts receivable: accounts receivable balance at the beginning of the year, $490,000; allowance for uncollectible accounts at the beginning of the year, $38,000 (credit balance); credit sales during the year, $1,900,000; accounts receivable written off during the year, $29,000; cash collections from customers, $2,050,000. Assuming the company estimates bad debts at an amount equal to 3% of credit sales.
Explanation / Answer
1) Bad debt expense for the year = 3% of Credit Sales = $1,900,000*3% = $57,000 2) year-end balance in the allowance for uncollectible accounts = $66,000 Opening balance of allowance for uncollectible accounts = $38,000 Add: Current year bad debt = $57,000 Less: accounts receivable written off during the year = $29,000
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