Question

At December 31, Amy Jo's Appliances had account balances in Accounts Receivable of $314,000 and in Allowance for Uncollectible Accounts of $590 (credit) before any adjustments. An analysis of Amy Jo's December 31 accounts receivable suggests that the allowance for uncollectible accounts should be 4% of accounts receivable. Bad debt expense for the year should be:

Answer 1

Given :

account balances in Accounts Receivable = $314,000

Allowance for Uncollectible Accounts = $590

allowance for uncollectible accounts should be 4% of accounts receivable.

To Find :

Bad debt expense

Solution : A bad debt expense is recognized when a receivable is no longer collectible because a customer is unable to fulfill their obligation to pay an outstanding debt due to bankruptcy or other financial problems.

We first find the balance that should be in the allowance account as of December 31

$314,000 × 4% = $12,560

We subtract the current balance in the allowance account to find the bad debt expense for

$12560 - $590 = $11,970

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