BMGT 220 at University of Maryland--College Park

2. Calculating Bad Debts

in Topic 7 (Problem 2 of 4)

A company began the year with Accounts Receivable of $250,000 and a balance in Allowance for Doubtful Accounts of $11,000 (cr.). During the year, the company had credit sales of $540,000, collections on Accounts Receivable of $600,000 and wrote off $9,000 for accounts specifically identified as uncollectible. Additionally, the company collected on $2,500 of accounts previously written off during the year.

Past experience indicates that 2% of credit sales will become uncollectible.

  1. What is the ending balance in the Accounts Receivable account?
  2. What is the ending balance in the Allowance for Doubtful account after adjustment?
Watch Solution (6:23) Hide Solution Reveal Solution
  1. Ending Accounts Receivable balance - 181,000
  2. Ending Allowance for Doubtful balance - 15,300

The Rest Of The Practice Problems

Click Here to View All Topic 7 Problems at Once View
1 The Effect of Bad Debt Expense Easy
2 Calculating Bad Debts
You are here. 		Moderate
3 The Effect of Uncollectible Accounts Moderate
4 Using the Balance Sheet Method Hard
← Topic 6

Topic 7 Videos

1 A/R and Bad Debts Introduction 7:09
2 Direct Method 4:15
3 The Allowance Method 8:56
4 Income Statement vs Balance Sheet Methods 13:14
5 Net Credit Sales 5:20
6 Write Offs and Reinstatements 8:26
Topic 8 →