A company had credit sales of $500,000 during the third quarter of 2013. It had to write-off $300 of accounts as uncollectible during the quarter, and had no recoveries. Its balance in Allowance for Doubtful Accounts was $2,000 at the beginning of the quarter. Based on historical experience and trends in the economy, the company expects that 1% of its credit sales will ultimately be uncollectible in the future. How much Bad Debt Expense should the company report for the third quarter of 2013?
There is a lot of extraneous information in this problem. We have enough information to calculate Bad Debt Expense using the percentage of sales method. The amount would be $500,000 x 0.01 = $5,000.
