The following information is available for Sunshine Company: Allowance for doubt

Question

The following information is available for Sunshine Company:

Allowance for doubtful accounts at December 31, 2013                               $ 16,000

Credit sales during 2014                                                                                   800,000

Accounts receivable deemed worthless and written off during 2014                18,000

As a result of a review and aging of accounts receivable, it has been determined that an allowance for doubtful accounts of $11,000 is needed at December 31, 2014. What amount should Sunshine record as "bad debt expense" for the year ended December 31, 2014?

Explanation / Answer

Allowance for doubtfule accounts on Jan1 2014 16,000 Less: Amount written off durirng 2014 18,000 Actual balance in Allowance account 2,000 Debit Required balance to be kept at end of 2014 11,000 Bad debt expense to be charged 13,000 Therefore, bad debts expense to be charged is $13,000 (11000+2000)

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