Flyer Company has provided the following Information prior to any year-end bad d
ID: 2491105 • Letter: F
Question
Flyer Company has provided the following Information prior to any year-end bad debt adjustment: Cash sales, $151,000 Credit sales. $451,000 Selling and administrative expenses, $111,000 Sales returns and allowances, $31,000 Gross profit, $491,000 Accounts receivable, $120,000 Sales discounts, $15,000 Allowance for doubtful accounts credit balance, $1,300 Flyer prepares an aging of accounts receivable and the result shows that 4% of accounts receivable Is estimated to be uncollectible. How much Is bad debt expense? $6,100 $3,500 $3,448 $4,800Explanation / Answer
ANSWER : $ 3500 As the informations are just before year-end bad debt adjustment, Accounts receivable balance of 120000 is after accounting for Credit sales(451000), Sales returns & allowances(31000)& Sales Discounts(15000) As per aging of Accounts Receivables Bad debt expense to be provided= 120000*4%= 4800 Balance in Allowance for doubtful accounts =1300 So, Bad debt expense to be provided in the current year= 4800-1300= $ 3500