Ervin Company uses the allowance method to account for uncollectible accounts receivable. The allowance account is adjusted based on bad debt expense as a percentage of credit sales. For 2024, net credit sales totaled $5,100,000, and the estimated bad debt percentage is 1.20%. No previously written-off accounts receivable were reinstated during 2024. The allowance for uncollectible accounts had a credit balance of $48,000 at the beginning of 2024 and $43,000, after adjusting entries, at the end of 2024. Required: 1. What is bad debt expense for 2024 as a percent of net credit sales? 2. Assume Ervin makes no other adjustment of bed debt expense during 2024. Determine the amount of accounts receivable written off during 2024. 3. If the company uses the direct write-off method, what would bad debt expense be for 20247 1. Bad debt expense as a percent of net credit sales 2. Accounts receivable written off 3. Bad debt expense using the direct write-off method

Ervin Company uses the allowance method to account for uncollectible accounts receivable. The allowance account is adjusted based on bad debt expense as a percentage of credit sales. For 2024, net credit sales totaled $5,100,000, and the estimated bad debt percentage is 1.20%. No previously written-off accounts receivable were reinstated during 2024. The allowance for uncollectible accounts had a credit balance of $48,000 at the beginning of 2024 and $43,000, after adjusting entries, at the end of 2024. Required: 1. What is bad debt expense for 2024 as a percent of net credit sales? 2. Assume Ervin makes no other adjustment of bed debt expense during 2024. Determine the amount of accounts receivable written off during 2024. 3. If the company uses the direct write-off method, what would bad debt expense be for 20247 1. Bad debt expense as a percent of net credit sales 2. Accounts receivable written off 3. Bad debt expense using the direct write-off method

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

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.

Question

Ervin Company uses the allowance method to account for uncollectible accounts receivable. The allowance account is adjusted based
on bad debt expense as a percentage of credit sales. For 2024, net credit sales totaled $5,100,000, and the estimated bad debt
percentage is 1,20%. No previously written-off accounts receivable were reinstated during 2024. The allowance for uncollectible
accounts had a credit balance of $48,000 at the beginning of 2024 and $43,000, after adjusting entries, at the end of 2024.
Required:
1. What is bad debt expense for 2024 as a percent of net credit sales?
2. Assume Ervin makes no other adjustment of bad debt expense during 2024. Determine the amount of accounts receivable
written off during 2024.
3. If the company uses the direct write-off method, what would bad debt expense be for 2024?
1. Bad debt expense as a percent of net credit sales
2. Accounts receivable written off
3. Bad debt expense using the direct write-aft method

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