Micelle Inc. reported credit sales of $600,000 and cash collections of $450,000 for last year. The ending balance in accounts receivable was $800,000. Bad debt expense is estimated at 1% of credit sales. The allowance for doubtful accounts had a balance of $80,000 at the beginning of the year. Assuming there are no write-offs made during the year, what was the balance in the allowance for doubtful accounts at the end of the year?

Question

Quizplus · Accepted Answer

The bad debt expense is 1% of $600,000, which is $6,000. The beginning balance in the allowance for doubtful accounts was $80,000. Since there are no write-offs, the ending balance is $80,000 + $6,000 = $86,000.