Question

Microsoft develops, produces, and markets a wide range of computer software, including the Windows operating system. On its recent financial statements, Microsoft reported the following information about net sales revenue and accounts receivable (amounts in millions). Current Year Prior Year Accounts receivable, net of allowances of $405 and $426 $ 19,792 $ 18,277 Net sales revenue 89,950 85,320 According to its Form 10-K, Microsoft recorded bad debt expense of $85 and there were no bad debt recoveries during the current year. (Hint: Refer to the summary of the effects of accounting for bad debts on the Accounts Receivable (Gross) and the Allowance for Doubtful Accounts T-accounts. Use the T-accounts to solve for the missing values.) Required: What amount of bad debts was written off during the current year

Answer 1

Answer:

     Allowances  

Debit        Credit

                       $426,000

                 $ 85,000

$106,000  

                 $405,000

Bad Debt

Debit   -    Credit  

$85,000  

Explanation:

Using T-Accounts you can see that the missing value in the Net Allowances are $106,000 that corresponds to the write-off accounts during the year.

The allowance begin the year with $426,000 then add 85 a bad expenses and finish the year with a balance of $405,000, so in the middle is the value of $106,000 , as a Debit value which means that the company write off that amount as uncollectible credits.