Asked by Rachael Petersen on Jul 05, 2024
Verified
Compute bad debt expense based on the following information:
(a) LRP Company estimates that 3% of net credit sales will become uncollectible. Sales revenue are $600000 sales returns and allowances are $30000 and the allowance for doubtful accounts has a $5000 credit balance.
(b) LRP Company estimates that 10% of accounts receivable will become uncollectible. Accounts receivable are $160000 at the end of the year and the allowance for doubtful accounts has a $400 debit balance.
Allowance for Doubtful Accounts
A balance sheet account representing the estimated percentage of accounts receivable that may not be collected.
Net Credit Sales
The total value of credit sales minus returns and allowances over a specific period, indicating the true revenue generated from credit transactions.
Accounts Receivable
The sum customers owe a company in exchange for products or services that have been delivered or utilized, pending settlement.
- Calculate and understand the impact of bad debt expense based on percentage estimates of net credit sales or accounts receivable balances.
Verified Answer
ZK
Zybrea KnightJul 06, 2024
Final Answer :
(a) Bad debt expense =$17,100[($600,000−$30,000)×.03]= \$ 17,100 [ ( \$ 600,000 - \$ 30,000 ) \times .03 ]=$17,100[($600,000−$30,000)×.03]
(b) Bad debt expense =$16,400[($160,000×10)+$400]= \$ 16,400 [ ( \$ 160,000 \times 10 ) + \$ 400 ]=$16,400[($160,000×10)+$400]
(b) Bad debt expense =$16,400[($160,000×10)+$400]= \$ 16,400 [ ( \$ 160,000 \times 10 ) + \$ 400 ]=$16,400[($160,000×10)+$400]
Learning Objectives
- Calculate and understand the impact of bad debt expense based on percentage estimates of net credit sales or accounts receivable balances.