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Belkou Company began operations on January 1, 2007. Its first year’s sales were $ 1,170,000, which were 70% on credit. During the year, $ 725,000 was collected from customers on account, and the company wrote off accounts worth $ 2,100. At the end of the year, management estimated that 0.5% of all credit sales would probably be uncollectible.

Now I already know that the bad debt expense is 4095. I’m just wondering how do you calculate the allowance for doubtful accounts.
See I thought you’d just take the 4095-2100 in writeoffs to get 1995, but apparently that is incorrect. Does that mean the allowance for doubtful accounts is just 4095? Thanks in advance.

1 Thought on Percentage of Credit Sales method?
  1. Reply
    Onya Y
    July 7, 2011 at 4:20 pm

    About Percentage of Credit Sales can be read in http://the-net-usa.blogspot.com/?q=Percentage%20of%20Credit%20Sales

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