Question

Exercise 5-67 (Algorithmic) Bad Debt Expense: Percentage of Credit Sales Method Bradford Plumbing had the following data for a recent year: Credit sales Allowance for doubtful accounts, 1/1 (a credit balance) $547,900 8,740 42,340 Accounts receivable, 1/1 Collections on account receivable Accounts receivable written off 489,770 14,250 Bradford estimates that 3.2% of credit sales will eventually default. Required: 1. Compute bad debt expense for the year (rounding to the nearest whole number). $ 14,245 x 2. Determine the ending balances in accounts receivable and allowance for doubtful accounts. Ending Balance $ 86,220 Accounts receivable Allowance for doubtful accounts $ 8,735 x Feedback Check My Work 1. and 2. The percentage of credit sales method attempts to estimate the ending balance in Bad Debt Expense by forming estimates based on past experience with uncollectible accounts.

Answer 1

1) Bad debt expense = 547900*3.2% = 17533

2) Ending balance

Account receivable = 86220

Allowance for doubtful accounts = 8740+17533-14250 = 12023