Company has net credit sales in 2006 of $120,000. accounts receivable are $40,000 and allowance for...?

Question

for doubtful accounts has a $200 credit balance on 12/31/06. if company estimates bad debt losses based on an aging of accounts receivable as $2,400, what is the bad debt expense for 2006?

Answer 1

Our 2006 expense bad debt is 2400, offset by a 200 provision which will have been zeroed at end of year.

Answer 2

Your allowance account already has $200 balance in it. You want it to reach $2,400, so you need to charge another $2,200 to the account:

Dr  Bad debts expense $2,200

Cr  Allowance for doubtful accounts $2,200

The answer is $2,200