Byris :

I got my 4% of Ending A/r as 23,600.

My A/r account is

B.bal of 300,000 + sales 1500,000-Cash 1200,000 - W.off 10,000= 590,000 End. A/Rble

4% of 590,000 = 23,600.Why is this figure wrong???Why do we have to net sales for curr.year like u did...Mine shld yield same amount...Plz help

bryris wrote: The logic still works: You start with a credit balance of 12,000 in the allowance account. During the year, 1,500,000 in sales generated an additional 15,000 to the credit side of the allowance account (also your first debit to BD exp for the year). You then remove 10,000, a debit to the account, for the write off. Then you analyze the A/R side to determine the 4% part. 300,000 beginning balance + 200,000 (net increase during the year before the write off) - 10,000 (the write off) give you an ending A/R of $490,000. Multiply that by 4%, yields 19,600. That should be the ending balance of the allowance account. So, set up the algebra: 12,000 + 15,000 - 10,000 (the write off) + X = 19,600. X= 2,600 <--- an additional debit to BD exp and a credit to allowance. 15,000 (from the sales piece) + 2,600 (from the 4% piece) = 17,600 total bad debt expense.