Answer:
1. The Bad debt expense for 2013 is $67,500
2. The amount of accounts receivable written off during 2013 is $69,500
3. If the company uses the direct write-off method, the bad debt expense for 2013 would be $69,500
Explanation:
1. In order toCalculate the bad debt expense for 2013 we would have to make the following calculation:
Bad debt expense=1.5% of Net Credit Sales
=1.5%×$4,500,000
=$67,500
The Bad debt expense for 2013 is $67,500
2. In order to Determine the amount of accounts receivable written off during 2013 we would have to make the following calculation:
amount of accounts receivable written off=$42,000+$67,500-$40,000
amount of accounts receivable written off=$69,500
The amount of accounts receivable written off during 2013 is $69,500
3. Using direct write off method, the bad debt expense is recognized only when the actual bad debt is incurred. The actual bad expense would be the amount of accounts receivable written off during the year. Accounts receivable written off during the year would be same in both the methods.
Thus, the bad debt expense for the year 2013 would be $69,500.
