Question

The following is a portion of the current assets section of the balance sheets of Avanti's, Inc., at December 31, 2020 and 2019: 12/31/20 12/31/19 Accounts receivable, less allowance for bad debts of $9,887 and $17,439, respectively $173,948 $239,842
Required:
a. If $11,722 of accounts receivable were written off during 2020, what was the amount of bad debts expense recognized for the year? (Hint Use a T-account model of the Allowance account, plug in the three amounts that you know, and solve for the unknown) Bad debt xpemse
b. The December 31, 2020, Allowance account balance includes $3,094 for a past due account that is not likely to be collected. This account has not been written off (1) If it had been written off, will there be any effect of the write-off on the working capital at December 31, 2020?

Answer 1

Answer:

Avanti's, Inc.

Bad Debts Expense = $4,170

Explanation:

a) Data:

Current assets section of the balance sheets of

Avanti's, Inc.,

at December 31, 2020 and 2019:   12/31/20       12/31/19

Accounts receivable,                      $183,835    $257,281

less allowance for bad debts of        $9,887       $17,439

Balance of Accounts receivable    $173,948    $239,842

Allowance for bad debts account

Account Details            Debit           Credit

Balance, 12/31/19                             $17,439

Accounts receivable  $11,722

Balance, 12/31/20         9,887

Bad debt expense                              4,170

Journal Entries:

Debit Bad Debts Expense $4,170

Credit Allowance for Bad Debts $4,170

To record bad debts expense for the period.