Jack Company provides for bad debt expense at the rate of 2% of accounts receivable. The following data are available for 2018: The Allowance for Doubtful Accounts balance at December 31, 2018, should be

Question

Jack Company provides for bad debt expense at the rate of 2% of accounts receivable. The following data are available for 2018:  The Allowance for Doubtful Accounts balance at December 31, 2018, should be

Quizplus · Accepted Answer

The formula to calculate the allowance for doubtful accounts is:

Allowance for Doubtful Accounts = (Accounts Receivable) x (Percentage of Bad Debts)

Using the data provided, we can calculate the allowance for doubtful accounts as follows:

Allowance for Doubtful Accounts = ($1,200,000) x (2%) = $24,000

Therefore, the Allowance for Doubtful Accounts balance at December 31, 2018, should be $24,000.

Jack Company Provides for Bad Debt Expense at the Rate