SMC had a 1/1/14 balance in the Allowance for Doubtful Accounts of $20,000. During 2014, it wrote off $14,400 of accounts and collected $4,200 on accounts previously written off. The balance in Accounts Receivable was $400,000 at 1/1 and $480,000 at 12/31. At 12/31/14, SMC estimates that 5% of accounts receivable will prove to be uncollectible. What is Bad Debt Expense for 2014? a. $4,000. b. $14,200. c. $18,400. d. $24,000.

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Business

Rowan Savage

26 August, 16:12

SMC had a 1/1/14 balance in the Allowance for Doubtful Accounts of $20,000. During 2014, it wrote off $14,400 of accounts and collected $4,200 on accounts previously written off. The balance in Accounts Receivable was $400,000 at 1/1 and $480,000 at 12/31. At 12/31/14, SMC estimates that 5% of accounts receivable will prove to be uncollectible. What is Bad Debt Expense for 2014? a. $4,000. b. $14,200. c. $18,400. d. $24,000.

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Jean Sheppard · Answer 1

b. $14,200

Explanation:

The computation of the bad debt expense is shown below:

= Balance in the Allowance for Doubtful Accounts - wrote off accounts + written off - estimated amount

= $20,000 - $14,400 + $4,200 - $24,000

= $14,200

The computation of the estimated amount is calculated below:

= Ending balance of accounts receivable * uncollectible percentage

= $480,000 * 5%

= $24,000