Question

Flyer Company has provided the following information prior to any year-end bad debt adjustment: Cash sales, $159,000 Credit sales, $459,000 Selling and administrative expenses, $119,000 Sales returns and allowances, $39,000 Gross profit, $499,000 Accounts receivable, $195,000 Sales discounts, $23,000 Allowance for doubtful accounts credit balance, $2,100 Flyer estimates bad debt expense assuming that 2% of credit sales have historically been uncollectible. What is the balance in the allowance for doubtful accounts after bad debt expense is recorded?

Answer 1

If Flyer Company has provided the following information prior to any year-end bad debt adjustment: Cash sales, $159,000 Credit sales, $459,000. Flyer estimates bad debt expense assuming that 2% of credit sales have historically been uncollectible. The balance in the allowance for doubtful accounts after bad debt expense is recorded will be: $11,280

First step is to determine the estimated bad debt expense

Bad debts expense=($459,000×2%)

Bad debt expense=$9,180

Now let determine the balance in the allowance for doubtful accounts after bad debt expense is recorded

Balance in allowance for doubtful accounts=$9,180+$2,100

Balance in allowance for doubtful accounts=$11,280

Inconclusion if Flyer Company has provided the following information prior to any year-end bad debt adjustment: Cash sales, $159,000 Credit sales, $459,000. Flyer estimates bad debt expense assuming that 2% of credit sales have historically been uncollectible. The balance in the allowance for doubtful accounts after bad debt expense is recorded will be: $11,280

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