Thineesha Corp. reported credit sales of $1,000,000 and cash sales of $100,000 for last year. The ending balance in accounts receivable was $1,500,000. Bad debt expense is estimated at 1% of ending accounts receivable. The allowance for doubtful accounts had a balance of $40,000 at the beginning of the year. What was the bad debt expense for the year?

Question

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The calculation for bad debt expense is: Ending Accounts Receivable x Bad Debt Expense Rate = Bad Debt Expense. So, 1% of $1,500,000 is $15,000. The allowance for doubtful accounts balance at the beginning of the year is irrelevant in this calculation.