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 2018, net credit sales totaled $5,100,000, and the estimated bad debt percentage is 1.20%, The allowance for uncollectible accounts had a credit balance of $48,000 at the beginning of 2018 and $43,000, after adjusting entries, at the end of 2018. Required: 1. What is bad debt expense for 2018 as a percent of net credit sales? 2. Assume Johnson makes no other adjustment of bad debt expense during 2018. Determine the amount of accounts receivable written off during 2018. 3. If the company uses the direct write-off method, what would bad debt expense be for 2018? Bad debt expense written off 3.Bad debt expense

Explanation / Answer

1) Calculation of bad debt expense for 2018: Bad debt expense= Net credit sales* estimated bad debt percentage                                     = 5100000*1.2/100= $61200 Bad debt expense= $61200 2) Calculation of amount of accounts recievable written off: Particulars Amount Balance at beginning of 2018 48000 Add: Bad debt expense for 2018(5100000*0.012) 61200 Less: Balance at the end of 2018 43000 Accounts recievable written off(48000+61200-43000) 66200 Accounts recievable written off is $66200 3)Calculation of bad debt expense: Amount of bad debt expense is accounts recievable written off that is $66200 Therefore bad debt expense is $66200

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