Question

As of January 1, 2021, Barley Co. had a credit balance of $520,000 in its allowance for uncollectible accounts. Based on experience, 2% of Farley's gross accounts receivable have been uncollectible. During 2021, Farley wrote off $650,000 of accounts receivable. Barley's gross accounts receivable as December 31, 2021 is $18,000,000. How much bad debt expense should Barley record for 2021?

Answer 1

Answer:

$490,000

Explanation:

The computation of the bad debt expense is shown below:

= Account receivable + (Gross Accounts receivable × estimated percentage given ) - (credit balance of Allowance for Doubtful Accounts)

= $650,000 +  ($18,000,000 × 2%) -  ($520,000)

= $650,000 + $360,000 - $520,000

= $490,000

We simply added the estimated amount and deduct the credit balance to the account receivable so that the accurate amount can come