Labrador Inc. has the following information available for the current year: Net sales $768,000 Bad Debt Expense $42,000 Accounts Receivable, Beginning of Year $138,000 Accounts Receivable, End of Year $73,000 Allowance For Doubtful Accounts, Beginning of Year $60,000 Allowance For Doubtful Accounts, End of Year $80,000 What was the amount of write-offs during the year

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Business

Finley Carroll

9 September, 14:37

Labrador Inc. has the following information available for the current year: Net sales $768,000 Bad Debt Expense $42,000 Accounts Receivable, Beginning of Year $138,000 Accounts Receivable, End of Year $73,000 Allowance For Doubtful Accounts, Beginning of Year $60,000 Allowance For Doubtful Accounts, End of Year $80,000 What was the amount of write-offs during the year

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Jacobs · Answer 1

For Accounts Receivable, the write-off is the total payments and discounts of $771,000 $ (138,000 + 768,000 - 42,000 - 93,000) or beginning receivables plus net sales minus bad debts and ending receivables.

For Allowance for Doubtful Accounts, the write-off is the amount taken to the Income Statement, that is $20,000 as additional expense for the period, by which the Allowance increased from $60,000 to $80,000 from beginning to end of the period.

Explanation:

The Accounts Receivable opening balance of $138,000 increased by the net sales of $768,000. It was reduced by Bad Debts of $42,000 and payments and discounts in order to arrive at an ending balance of $73,000.

For the Allowance for Doubtful Accounts, the beginning balance is compared to the ending balance to ascertain if there is an increase or a decrease. An increase signals additional expense to the Income Statement while a decrease shows expense recovery.