Smithson Corporation had a 1/1/14 balance in the Allowance for Doubtful accounts

Question

Smithson Corporation had a 1/1/14 balance in the Allowance for Doubtful accounts of $20,000. During 2014, it wrote off $14,400 of accounts and collected $4,200 on accounts previously written off. The balance in Accounts Receivable was $400,000 at 1/1 and 480,000 at 12/31. At 12/31/14, Smithson estimates that 5% of accounts receivable will prove to be uncollectible. What is Bad Debt Expense for 2014? I don't understand why the answer is $14,200 also I can't seem to figure out how that was worked out. Can someone please give a visual explanation and what would be the journal entry? Thank you.

Explanation / Answer

$14,200 Statement showing computation of Bad debts expense Particulars Amounts Opening Balance in Allowance for Doubtful Accounts          20,000.00 Less : Accounts Wrote Off through Doubtful Accounts          14,400.00 Balance in Allowance for doubtful Accounts             5,600.00 Add : Bad debts recovered             4,200.00 Balance in Allowance for doubtful Accounts             9,800.00 Closing Balance should be = 480,000*5% =            24,000.00 Increase in provision required(24000-9800)          14,200.00 Entry Would be Bad Debts Expense Dr          14,200.00 To Allowance for doubtful Accounts            14,200.00

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