Question

The annual report for Fallon Holding Corporation contained the following information: (in millions) 2016 2015 Accounts Receivable $ 671 $ 733 Allowance for Doubtful Accounts 31 32 Accounts Receivable, Net $ 640 $ 701 Assume that accounts receivable write-offs amounted to $12 during 2016 and $2 during 2015, and that Fallon did not record any recoveries. Required: Determine the Bad Debt Expense for 2016 based on the above facts. (Enter your answer in millions.)

Answer 1

Answer:

bad debt expense for the year 2016: 11

Explanation:

We can solve for bad debt expense doing the following

beginning allowance

- write-off accounts

+ bad debt expense

Equals to ending allowance

We plug our values:

2016 Beginning  allowance      32

(Ending 2015)

write-off                                     (12)

bad debt expense                      ?  

2016 Ending  allowance            31

And solve for bad debt expense:

Bad debt expense = 12 + 31 - 32 = 11