Information for Tisipai Company in 2014 follows:
Total net credit sales .......................................... $3,300,000
Accounts receivable at December 31 ....................... 1,250,000
Accounts receivable written off ............................. 48,000
Amount collected on accounts previously written off (after write off but before year end) 8,000
Instructions
(a) Assume that Tisipai Company decides to use the allowance method and estimates its uncollectible accounts to be $52,000 based on an aging schedule. What amount of bad debt expense will Tisipai record if Allowance for Doubtful Accounts had an opening balance of $30,000 on January 1, 2014?
(b) Assume the same facts as in (a), except that the Allowance for Doubtful Accounts had a $42,250 balance on January 1, 2014. What amount of bad debt expense will Tisipai record on December 31, 2014?
(c) How does the amount of accounts written off during the period affect the amount of bad debt expense recorded at the end of the period?
(d) How does the collection of an account that had previously been written off affect the net realizable value of accounts receivable?
TAKING IT FURTHER
Why is a company not certain what accounts are not collectible?