A company began the year with Accounts Receivable of $250,000 and a balance in Allowance for Doubtful Accounts of $11,000 (cr.). During the year, the company had credit sales of $540,000, collections on Accounts Receivable of $600,000 and wrote off $9,000 for accounts specifically identified as uncollectible. Additionally, the company collected on $2,500 of accounts previously written off during the year.
Past experience indicates that 2% of credit sales will become uncollectible.
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|1||The Effect of Bad Debt Expense||Easy|
Calculating Bad Debts
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|3||The Effect of Uncollectible Accounts||Moderate|
|4||Using the Balance Sheet Method||Hard|