A financial services firm routinely processes a large volume of account change requests. a lean six sigma team wants to understa
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Answer:
Bad Debt Expense for 20x2 is $50,245
Explanation:
Note: The full question is attached as picture below
Ending balance = Beginning balance + Sales on account or credit sales - Cash collected - Uncollected accounts
Beginning balance of Accounts receivable (given) = $850000
Credit sales in 20X2 = 80% * $3125000 = $2500000
Cash collections (given) = $2400000
Uncollectible accounts (given) = $52100
Ending balance = $850000 + $2500000 - $2400000 - $52100 = $897900
Allowance required to be made for 20X2 = 5% of Accounts receivables ending balance on 20X2 = 5% * $897900 = $44895
First we will write off uncollectible accounts of $52100 from the beginning balance of allowance for uncollectible accounts. (Beginning balance of allowance for doubtful accounts = $46750 ).
Difference = Beginning balance of allowance account - Uncollectible accounts = $46750 - $52100 = - $5350
It means that there is a shortfall of $5350 in the allowance for doubtful accounts. And, also a total of $44895 should be there in the credit of Allowance for doubtful accounts at the end of 20X2. Allowance needed in 20X2 = $44895 + $5350 = $50,245 . So, the Bad debt expense for 20X2 is $50,245.
