Question

Microsoft develops, produces, and markets a wide range of computer software, including the Windows operating system. On its recent financial statements, Microsoft reported the following information about net sales revenue and accounts receivable (amounts in millions).

Current Year Prior Year
Accounts receivable, net of allowances of $405 and $426 $19,792 $18,277
Net sales revenue 89,950 85,320


According to its Form 10-K, Microsoft recorded bad debt expense of $14 and there were no bad debt recoveries during the current year.

Required:
What amount of bad debts was written off during the current year?

Answer 1

$106 million

Step-by-step explanation:

allowance for doubtful accounts

debit credit

beg. balance 426

bad debt 85

ending balance 405

106

Since you need $106 million to balance the account, that should be the amount of bad debt written off during the current year. Allowance for doubtful accounts is a contra asset account, any debit balance increases accounts receivable while a credit balance decreases it.