Question

Jack Company provides for bad debts expense at the rate of 2% of credit sales. The following data are available for 2013:

Allowance for doubtful accounts, 1/1/13 (Cr.)
$ 12,000
Accounts written off as uncollectible during 2013
9,000
Credit sales in 2013
1,500,000

The Allowance for Doubtful Accounts balance at December 31, 2013, should be:

Answer 1

Answer:

$27,000

Explanation:

To calculate the balance for the Allowance for Doubtful Accounts account, we first have to calculate the total estimated bad debts for the year = $1,500,000 x 2% = $30,000.

Then we need to add the bad debt that was written off during the year ($9,000) and subtract the balance for the same account at the beginning of the year ($12,000).

= $30,000 + $9,000 - $12,000 = $27,000