Suppose that the balance of a company's Allowance for Uncollectible Accounts was $6,200 (credit)at the end of 2012,prior to any adjustments.The company estimated that the total of uncollectible accounts in its accounts receivable was $44,300 at the end of 2012.Total accounts receivable were $150,000 on December 31,2012,and total credit sales for 2012 were $330,000.What amount of bad debt expense would appear in the company's 2012 income statement,assuming the company uses the percentage-of-receivables method?

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Quizplus · Accepted Answer

The percentage-of-receivables method calculates bad debt expense as a percentage of total accounts receivable. The percentage is based on the company's historical experience with uncollectible accounts. In this case, the company estimated that the total of uncollectible accounts in its accounts receivable was $44,300 at the end of 2012, which is 29.53% of total accounts receivable ($44,300/$150,000). Therefore, the bad debt expense for 2012 would be $38,100 ($150,000 x 29.53%).

Suppose That the Balance of a Company's Allowance for Uncollectible