# Bad debt question

Internet Services, Inc. reported gross accounts receivable of \$60,000 and an allowance for doubtful (uncollectible) accounts of \$6,000 on its 12/31/20X0 balance sheet. During 20X1, credit sales totaled \$1,800,000, cash collected from customers was \$1,680,000 and receivable write-offs totaled \$9,600. Internet Services, Inc., which ages its accounts receivable, estimates that 10% of its gross accounts receivable on 12/31/20X1 will be uncollectible. If Internet Services, Inc. estimates its bad debts to be 2% of credit sales, what balance would the company report in its allowance for doubtful (uncollectible) accounts on its 12/31/20X1 balance sheet? A. \$14,000 B. \$35,200 C. \$32,400 D. \$43,500

new credit sales = 1800 cash collected = 1680 Receivable writeoff = 9.6 So given 2% of credit sales is Bad Debt new Bad Debt = 2% * 180 = 36 Old Bad Debt Balance = 6 Write Off = 9.6 So new Bad Debt = 36 + 6 - 9.6 = 32.4 Ans C

Right thatâ€™s correct. So my question about this was the 10%. What is that?

a big distractor!!!

so gross accounts receivable is not the same as credit sales? Thanks cpk