Johnson Company uses the allowance method to account for uncollectible accounts

Question

Johnson Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is established as a percentage of credit sales. For 2013, net credit sales totaled $5,400,000, and the estimated bad debt percentage is 1.50%. The allowance for uncollectible accounts had a credit balance of $51,000 at the beginning of 2013 and $44,500, after adjusting entries, at the end of 2013.

1) Determine the amount of accounts receivable written off during 2013?

2) If the company uses the direct write-off method, what would bad debt expense be for 2013?

Explanation / Answer

Johnson Company 1. Amount of accounts receivable written off during 2013 2003 Beginning Balance in allowance for uncollectible accounts $          51,000 Credit Add:Current Year additions ($ 5,400,000 x 1.5%) $          81,000 Less 2003 ending Balance in allowance for uncollectible accounts $         -44,500 Amount of Accounts receivable written off during the year $          87,500 Answer 2. Bad debt expense for the year 2013, if direct write-off method used Net Credit Sales $    54,00,000 Bad debt expense (1.5% of credit sales) $          81,000 Answer

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