Under the direct method it's the actual amount written off in the period.
or $87,500
Full calculation:
5,400,00*.015=81,000+51,000=
132,000 - 44,500=87,500.
Johnson Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is established as a percentage of credit sales. For 2013, net credit sales totaled $5,400,000, and the estimated bad debt percentage is 1.50%. The allowance for uncollectible accounts had a credit balance of $51,000 at the beginning of 2013 and $44,500, after adjusting entries, at the end of 2013.
If the company uses the direct write-off method, what would bad debt expense be for 2013?
I thought the amount would be 81k, but it's not. Any clarification would be appreciated!
