Question

Mills Corporation's balance sheet included the following information: Accounts Receivable $ 490,000 Less: Allowance for Doubtful Accounts 64,000 Accounts Receivable, Net of Allowance $ 426,000 If the Allowance account had a credit balance of $27,000 immediately before the year-end adjustment for bad debts and no accounts were written-off or allowed for during the year, what was the amount of Bad Debt Expense recognized during the year

Answer 1

Answer:

$37,000

Explanation:

Data provided as per the question below:-

Account receivable = $490,000

Net allowance = $426,000

Credit balance = $27,000

The computation of Bad Debt Expense is shown below:-

Bad Debt Expense = Account receivable - Net allowance - Credit balance

= $490,000 - $426,000 - $27,000

= $37,000

So, for computing the bad debt expenses we simply applied the above formula.

Answer 2

Answer:

$37,000

Explanation:

Bad debt Expense will be calculated using the percentage of debt loss. The expense will be calculated using the account receivable balance.

Allowance for Doubtful Accounts is estimated as $64,000

Allowance for Doubtful Accounts Balance = $27,000

As Allowance for Doubtful Accounts already have credit balance of $27,000, we need to adjust the remainder to make the closing balance of Allowance for Doubtful Accounts $64,000 at the year end.

Adjustment Value = $64,000 - $27,000 = $37,000