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marin [14]
3 years ago
7

In the balance sheet at the end of its first year of operations, Dinty Inc. reported an allowance for uncollectible accounts of

$82,000. During the year, Dinty wrote off $31,800 of accounts receivable it had attempted to collect and failed. Credit sales for the year were $2,340,000, and cash collections from credit customers totaled $1,910,000. What bad debt expense would Dinty report in its first-year income statement? 1.$82,000.2. $50,200. 3.$113,800.
Business
1 answer:
Vlada [557]3 years ago
7 0

Answer:

The correct option is 2. $50,200

Explanation:

Please see below the required journals for the transactions that occurred:

Debit Allowance for doubtful accounts             $31,800

Credit Accounts receivable                                $31,800

(<em>To record write-off of accounts receivable)</em>

Debit Accounts receivable                           $2,340,000

Credit Sales revenue                                    $2,340,000

<em>(To record credit sales during the year)</em>

Debit Cash                                                      $1,910,000

Credit Accounts receivable                           $1,910,000

<em>(To record collection on account)</em>

  • The effect of the above journals on allowance for doubtful account is a reduction. Since Dinty already assessed its allowance for doubtful account to be $82,000, bad debt expense required will be $50,200 ($82,000 - $31,800).
  • The balance in accounts receivable will be $2,340,000 - $1,910,000 - $31,800 = $398,200.
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