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The following information relates to Beta Corp's accounts receivable: accounts receivable balance at the beginning of the year, $600,000; allowance for uncollectible accounts at the beginning of the year, $21,000 (credit balance); Sales during the year, $1,830,000; accounts receivable written off during the year, $41,000; cash collections from customers, $2,100,000
The following information relates to Beta Corp's accounts receivable: accounts receivable balance at the beginning of the year, $600,000; allowance for uncollectible accounts at the beginning of the year, $21,000 (credit balance); Sales during the year, $1,830,000; accounts receivable written off during the year, $41,000; cash collections from customers, $2,100,000. Assuming the company estimates bad debts at an amount equal to 3% of ending accounts receivable.
Calculate bad debt expense for the year.
Expert Solution
Year-end balance in the allowance for uncollectible accounts = Beginning balance in allowance for doubtful accounts - Write offs
= $21,000 - $41,000
= -$20,000
Accounts receivable at year end = Beginning receivables + Sales - collections - Write off
= $600000 + $1830000 - $2100000 - 41000
= $ 289000
Bad debts expense for the year = ($ 289000* 3%) - (-20000)
= $ 28670
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