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Exercise 7-13 (Algo) Uncollectible accounts; allowance method estimating bad debts as percentage of net sales vs. direct write-off method [LO7-5, 7-6] Ervin Company uses the
Exercise 7-13 (Algo) Uncollectible accounts; allowance method estimating bad debts as percentage of net sales vs. direct write-off method [LO7-5, 7-6]
Ervin Company uses the allowance method to account for uncollectible accounts receivable. The allowance account is adjusted based on bad debt expense as a percentage of credit sales. For 2024, net credit sales totaled $5,900,000, and the estimated bad debt percentage is 1.50%. No previously written-off accounts receivable were reinstated during 2024. The allowance for uncollectible accounts had a credit balance of $56,000 at the beginning of 2024 and $47,000, after adjusting entries, at the end of 2024.
Required:
- What is bad debt expense for 2024 as a percent of net credit sales?
- Assume Ervin makes no other adjustment of bad debt expense during 2024. Determine the amount of accounts receivable written off during 2024.
- If the company uses the direct write-off method, what would bad debt expense be for 2024?
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