Crane Company had a 1/1/20 balance in the Allowance for Doubtful Accounts of $33500. During 2020, it wrote off $22000 of accounts and collected $6620 on accounts previously written off. The balance in Accounts Receivable was $630000 at 1/1 and $730000 at 12/31. At 12/31/20, Crane estimates that 5% of accounts receivable will prove to be uncollectible. What is Bad Debt Expense for 2020? $18380. $25000. $3000. $36500.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Crane Company had a 1/1/20 balance in the Allowance for Doubtful Accounts of $33500. During 2020, it wrote off $22000 of accounts and collected $6620 on accounts previously written off. The balance in
Bad debt expenses under (%) of Accounts receivables approach:
[ Accounts receivables x Estimated Uncollectible (%) ]
+/- Debit/Credit Balance of Allowance for Doubtful Accounts
Accounts receivables and Estimated Uncollectible (%) is given directly. We only need to calculate the ending balance of the Allowance for Doubtful Accounts.
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