Question

Wellington Corp. has outstanding accounts receivable totaling $6.5 million as of December 31 and sales on credit during the year of $24 million. There is also a credit balance of $12,000 in the allowance for doubtful accounts. If the company estimates that 6% of its outstanding receivables will be uncollectible, what will be the amount of bad debt expense recognized for the year

Answer 1

Answer:

$508,000

Explanation:

Calculation to determine what will be the amount of bad debt expense recognized for the year

Using this formula

Bad debt expense=(Outstanding accounts receivable*Uncollectible outstanding receivables percentage)-Credit balance)

Let plug in the formula

Bad debt expense=($6.5million*8%)-$12,000

Bad debt expense=$520,000-$12,000

Bad debt expense=$508,000

Therefore what will be the amount of bad debt expense recognized for the year is $508,000