Bad Debt Expense Calculation in 2023

What is the amount of accounts receivable written off during 2023?

a. $8,720,000

How to compute the amount of bad debt expense recorded for 2023?

b. The amount of bad debt expense recorded for 2023 is $8,720,000.

Answer:

a. The amount of accounts receivable written off during 2023 is $8,720,000.

b. The amount of accounts receivable written off during 2023 is $8,720,000, and the amount of bad debt expense recorded for 2023 is also $8,720,000.

a. To determine the amount of accounts receivable written off during 2023, we need to find the difference between net credit sales and cash collections. Net credit sales for 2023 were $9,600,000, representing the total amount of credit sales made during the year. Cash collections for 2023 were $880,000, the actual cash received from customers for those credit sales. By subtracting the cash collections from the net credit sales ($9,600,000 - $880,000), we get accounts receivable written off as $8,720,000.

b. To compute the amount of bad debt expense recorded for 2023, we consider the allowance for doubtful accounts, an estimate of potentially uncollectible accounts receivable due to customer defaults. In this case, the bad debt expense recorded for 2023 is equal to the accounts receivable written off, which is $8,720,000.