Class Quest Company had the following balances as at January 1, 2016 Accounts Re
ID: 2438718 • Letter: C
Question
Class Quest Company had the following balances as at January 1, 2016 Accounts Receivable Allowance for Doubtful Accounts $32,000 Credit During the fiscal year 2016 (Jan 1 to Dec 31 2016), the company had the following transactions: $600,000 Debit Total Sales Cash collected from credit customers Write-offs of uncollectible accounts $7,200,000 (of which 45% represents cash sales). $3,000,000 $22,000. Required:If the company estimates that 2.80% of the Accounts Receivable Balance is uncollectible, what amount would the company record as the bad debts expense for the year? Bad Debts ExpensesExplanation / Answer
Balance of Accounts receivable (Gross) Beginning balance of AR 600000 Add: Sales in account (7200,000*55%) 3960000 Less: Cash collected 3,000,000 Less: Amount wirtten off 22000 Accouonts receivable 938,000 Balance of Allowance for doubtful debts: Beginning Balance 32000 Less: Amount written off 22000 Balance of Allowance for doubtful debts: 10000 Required balance at the end 26264 (938000*2.80%) Bad debts expense 16264