Flyer Company has provided the following
Cash sales,$150,000
Credit sales,$450,000
Selling and administrative expenses,$110,000
Sales returns and allowances,$30,000
Gross profit,$290,000
Accounts receivable,$110,000
Sales discounts,$14,000
Allowance for doubtful accounts credit balance,$1,200
Flyer estimates bad debt expense assuming that 1.5% of credit sales are uncollectible.What is the balance in the allowance for doubtful accounts after bad debt expense is recorded?

Question

Flyer Company has provided the following 
Cash sales,$150,000
 Credit sales,$450,000
 Selling and administrative expenses,$110,000
 Sales returns and allowances,$30,000
Gross profit,$290,000
 Accounts receivable,$110,000
Sales discounts,$14,000
Allowance for doubtful accounts credit balance,$1,200
Flyer estimates bad debt expense assuming that 1.5% of credit sales are uncollectible.What is the balance in the allowance for doubtful accounts after bad debt expense is recorded?

Quizplus · Accepted Answer

The allowance for doubtful accounts ($7,950) = Bad debt expense (1.5% * $450,000) plus the allowance for doubtful accounts credit balance ($1,200).

Flyer Company Has Provided the Following