Question

Maple Co. provides for bad debts expense at the rate of 1.73% of credit sales for the period. On Jan 1, 20X1, the Allowance for Bad Debts was $30,000. There were $16,000 of accounts written off during the year. Credit sales for the year were $760,000. What is the balance in the Allowance for Bad Debts account?

Answer 1

The balance in the Allowance for Bad Debts account is $27,148.

Step-by-step explanation:

To find the balance in the Allowance for Bad Debts account, we need to calculate the bad debts expense for the year and adjust the beginning balance of the allowance. The bad debts expense is calculated by multiplying the credit sales for the year by the bad debts expense rate of 1.73%. In this case, the bad debts expense would be $760,000 * 1.73% = $13,148. To adjust the beginning balance of the allowance, we subtract the amount of accounts written off during the year, which is $16,000. Therefore, the balance in the Allowance for Bad Debts account would be $30,000 - $16,000 + $13,148 = $27,148.