Question

The following factors are available concerning Astaire Company on December 31:

Accounts receivable $160,000

Notes receivable 20,000

Allowance for doubtful accounts 460 (debit balance)

Sales for this year 800,000

Sales return and allowance 20,000

The company’s president said he thought 6 % of all outstanding receivables (accounts and notes) would not collected. The company accounts was of the opinion that 1.5 percent of net sales would result in bad debts. What would be the balance in the Bad Debt Expense account at the end of the year, after adjustment, if

A) the presidents ideas are accepted ? $________

B) the accounts ideas are followed ? _____

Answer 1

A
The president's ideas are accepted:
Estimated amount uncollectible	10800	=(160000+20000)*6%
Add: Debit balance in Allowance for doubtful accounts	460
Balance in the Bad Debt Expense account	11260
B
The accountant's ideas are followed:
Balance in the Bad Debt Expense account	11700	=(800000-20000)*1.5%