Respuesta :
$5,500 is the balance in the allowance for doubtful accounts after bad debt expense is recorded.
What are bad debts ?
Bad debt, sometimes regarded as uncollectible accounts expense, is a sum of money owed to a creditor that is likely to go unpaid and for which the creditor is unwilling to take action to collect for a variety of reasons, frequently because the debtor lacks the funds to do so, for instance because a company is going bankrupt or into liquidation. Depending on accounting practices, legal considerations, and the institution's provisioning, there are many technical definitions of what a bad debt is. Bank debts in the USA that are more than 90 days past due are referred to as "problem loans."
Accounting sources indicate that as soon as a bad debt is anticipated, the entire amount should be written off to the profit and loss account or a provision for bad debts.
To solve the question :
Given,
Acc. Receivable: $110,000
Allowance for doubtful accounts = 5% of accounts receivable
The allowance for doubtful accounts balance equals 5% of accounts of accounts receivable
= 5% × $110,000.
= $5,500
Hence, $5,500 is the balance in the allowance for doubtful accounts after bad debt expense is recorded
The complete question is mentioned below :
Flyer Company:
- Cash Sales: $150,000
- Credit Sales: $450,000
- Selling and Administrative Exp: $110,000
- Sales returns and allowances: $30,000
- Gross Profit: $490,000
- Acc. Receivable: $110,000
- Sales Discount: $14,000
- Allowance for doubtful accounts: $1,200
Flyer estimates bad debt expense assuming that 5% of accounts receivable is estimated to be uncollectible. What is the balance in the allowance for doubtful accounts after bad debt expense is recorded?
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