A trial balance for Green Company before adjustment included the following: Debi

Question

A trial balance for Green Company before adjustment included the following:

   Debit  

Credit  

Accounts receivable

$140,000

Allowance for doubtful accounts

730

Sales

$610,000

Sales returns and allowances

8,000

Instructions: Calculate bad debt expense assuming that the estimate of uncollectible accounts is determined by taking

1) 5% of gross accounts receivable;

(2) 3% of gross accounts receivable and assume a $600 debit balance;

3) 10% of net sales.

(Assume each of this is an independent scenario).

   Debit  

Credit  

Accounts receivable

$140,000

Allowance for doubtful accounts

730

Sales

$610,000

Sales returns and allowances

8,000

Explanation / Answer

Calculate bad debt expense :

1) Bad debt expense = (140000*5)-730 = 6270

2) Bad debt expense = (140000*3%)+600 = 4800

3) Bad debt expense = (610000-8000)*10% = 60200

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