Question

Vasguez Corporation had a 1/1/20 balance in the Allowance for Doubtful Accounts of $20,000 CR. During 2020, 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 1/1/20 and $480,000 at 12/31/20. At 12/31/20, Vasguez estimates that 5% of accounts receivable will prove to be uncollectible. What is Bad Debt Expense for 2020?
a. $14,200
b. $24,000
c. $18,400
d. $4,000

Answer 1

Answer:

a. $14,200

Explanation:

The computation of the bad debt expense is shown below:

Balance in Allowance for doubtful Accounts = Opening Balance in Allowance for Doubtful Account - Accounts Wrote Off  + Bad debts recovered

= $20,000 - $11,400 + $4,200

= $9,800

And, Closing Balance is

= $480,000 × 5%

= $24,000

So, the bad debt expense is

= $24,000 - $9,800

= $14,200

We simply applied the above calculations