During the year the sales department wrote off $250,000 of accounts receivable. They have now decided that 7% of their ending A/R balance is uncollectible. BSO uses the % of A/R method for recognizing bad debt expense.
Account Balance
Year 2 Year 1
A/R $1,500,000 $1,400,00
Allowance for Bad Debts $50,000 $40,000