To calculate the bad debt expense for the period, we need to determine the estimated uncollectable amount of the accounts receivable.
Accounts Receivable = $600,000
Allowance for Doubtful Accounts = $4,200
The credit balance in the allowance for doubtful accounts represents the estimated uncollectable amount already accounted for. Therefore, the remaining uncollectable amount will be:
Uncollectable Amount = Accounts Receivable - Allowance for Doubtful Accounts
Uncollectable Amount = $600,000 - $4,200
Uncollectable Amount = $595,800
The company believes that 3% of their accounts receivable will be uncollectable. Hence, the estimated bad debt expense for the period will be:
Bad Debt Expense = Uncollectable Amount × Percentage
Bad Debt Expense = $595,800 × 0.03
Bad Debt Expense = $17,874
Therefore, Chameleos C. would record a bad debt expense of $17,874 for the period.
Chameleos C. made $4,000,000 in credit sales and has $600,000 of accounts receivable at the end of the period. They also have a credit balance of $4,200 in their allowance for doubtful accounts. Chameleos C0. believes that 3% of their accounts receivable will be uncollectable. What would they record as their bad debt expense for the period?
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