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how to record bad debt
accounting rates bad?
Extreme Sport uses the method of allocation to account for bad debts. In 2007, the company recorded $ 650,000 in credit sales. At the end of 2007, account balances were: Accounts receivable, $ 185,000; Provision for doubtful debts, $ 5,000 (credit). If the bad debt expense is estimated at 4% of sales on credit, how Bad Debts will be the year's final outturn account? What is the expenditure rate bad?
The charge for doubtful accounts is that you have to go back to the balance of the provision for credit losses up to 4% of 650,000. The total allowance for doubtful receivables suspicious should be 26,000. This account shows a credit balance, and you have a credit balance of 5000. So you need a load of bad Claims for 26,000-5,000. This is 21,000. Your bad debt expense should be 21,000 in 2007.
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