Ralston Hardware reported the following items for 2014: $$\begin{array} { l c }
\text { Accounts receivable balance, January 1, 2014 } & \$ 125,000 \
\text { Allowance for doubtful accounts balance, January 1, 2014 } & 3,000 \mathrm { CR } . \
\text { Total credit sales during 2014 } & 653,000 \
\text { Total collections on accounts receivable during 2014 } & 567,000
\end{array}$$ Experience indicates that 3% of the outstanding accounts receivable at the end of each year ultimately will be uncollectible.What should be the December 31, 2014, bad debt expense using the percentage- of-receivables method?

Question

Ralston Hardware reported the following items for 2014: $$\begin{array} { l c } 
\text { Accounts receivable balance, January 1, 2014 } & \$ 125,000 \
\text { Allowance for doubtful accounts balance, January 1, 2014 } & 3,000 \mathrm { CR } . \
\text { Total credit sales during 2014 } & 653,000 \
\text { Total collections on accounts receivable during 2014 } & 567,000
\end{array}$$ Experience indicates that 3% of the outstanding accounts receivable at the end of each year ultimately will be uncollectible.What should be the December 31, 2014, bad debt expense using the percentage- of-receivables method?

Quizplus · Accepted Answer

The ending accounts receivable balance is $211,000 ($125,000 + $653,000 - $567,000). The estimated uncollectible amount is 3% of $211,000, which is $6,330. The allowance account already has a $3,000 credit balance, so the bad debt expense needed is $3,330 ($6,330 - $3,000).

Ralston Hardware Reported the Following Items for 2014 Experience Indicates That 3% of the Outstanding Accounts Receivable at l