Ervin Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is established as a percentage of credit sales. For 2021, net credit sales totaled $4,500,000, and the estimated bad debt percentage is 1.5%. No previously written-off accounts receivable were reinstated during 2021. The allowance for uncollectible accounts had a credit balance of $42,000 at the beginning of 2021 and $40,000, after adjusting entries, at the end of 2021. Required: 1. What is bad debt expense for 2021 as a percent of net credit sales

Question

contestada

Respuesta :

Tutorconsortium323 Tutorconsortium323 · Answer 1 · 2022-07-18T21:37:26+02:00

Ervin Company uses the allowance method to account for uncollectible accounts receivable :

1) The estimated bad debt percentage is 1.5% of $4,500,000 =$ 67,500.

2) Accounts Receivable Written Off = $ 69500.

3) If direct method is used the amount of bad debts expense during the year 2021 would be $ 67,500.

For 2021, Net credit sales totaled = $4,500,000,

1)The estimated bad debt percentage is 1.5% of $4,500,000 =$ 67,500

Allowance for uncollectible accounts beginning balance $42,000 Cr

Add Bad Debts $ 67,500

Deduct Allowance for uncollectible accounts ending balance $40,000

2) Accounts Receivable Written Off = $ 69500

This can also be determined using a T account

Debt Credit

Beg Bal; $ 42,000

Bad debts 67,500

A/R written Off

69,500

Balance $ 40,000

3) If direct method is used the amount of bad debts expense during the year 2021 would be $ 67,500

I understand that the question you are looking for is:

Required:

1. What is bad debt expense for 2021 as a percent of net credit sales?

2. Assume Ervin makes no other adjustment of bad debt expense during 2021. Determine the amount of accounts receivable written off during 2021.

3. If the company uses the direct write-off method, what would bad debt expense be for 2021?

Learn more about Net Credit Sales on:

brainly.com/question/18956761

#SPJ4