contestada

Happy Lawn Company started a lawn services business on January 1, 20X1 (so all account balances were zero on January 1, 20X1). It sends invoices to its customers for lawn maintenance services at the end of each month, and expects the customer to pay within 30 days. All of these sales were made on credit. During 20X1, cash collected from its customers totaled $750,000 for services rendered during the year. At the end of 20X1, the Accounts Receivable for Happy Lawn had a balance of $60,000. After all write-offs but before the year-end adjusting entry, the Allowance for Doubtful Accounts had a debit balance of $4,000.

Assume that Happy Lawn uses the percentage of credit sales method (to directly calculate the bad debt expense) instead of the aging method, and it is estimated that it will not collect 1% of the total credit sales.

Required:
Under this assumption what is Happy Lawn's 20X1 Bad Debt Expense?

Respuesta :

abiolataiwo2015

Answer:

$754,000

Explanation:

Calculation to determine Happy Lawn's 20X1 Bad Debt Expense?

Using this formula

Bad Debt Expense=Cash collected +

Allowance for Doubtful Accounts debit balance

Let plug in the formula

Bad Debt Expense=$750,000+$4,000

Bad Debt Expense=$754,000

Therefore Happy Lawn's 20X1 Bad Debt Expense is $744,000

anthougo

Based on this given assumption, Happy Lawn's 20x1 Bad Debt Expense for the year is $12,140 ($8,140 + $4,000).

Data and Calculations:

Cash collected during 20X1 = $750,000

Accounts Receivable balance at year-end = $60,000

Doubtful Accounts after write-offs = $4,000

The total credit sales = $814,000 ($750,000 + $60,000 + $4,000)

Estimated uncollectible = 1% of total credit sales

Therefore, the uncollectible allowance (doubtful accounts) balance would be = $8,140 ($814,000 x 1%)

Thus, based on the assumption, Happy Lawn's 20x1 Bad Debt Expense is $12,140 ($8,140 + $4,000).

Learn more about using the percentage of credit sales method to calculate the bad debt expense here: https://brainly.com/question/14104071

Otras preguntas