Total doubtful accounts at the end of the year are estimated to be $12,500 based on...

Total doubtful accounts at the end of the year are estimated to be $12,500 based on an aging of accounts receivable. If the balance in the Allowance for Doubtful Accounts is a $3,500 debit before adjustment, what is current year's Bad Debt Expense?

Solutions

Expert Solution

Notes: 1

Allowance Method: In this method we can debit the all expected to be uncollected in bad debt expenses
	and credited to allowance for doubtful account. Once uncollectable amount confirmed from customer than we can
	debited to allowance account and credit to account receivable account

Balance in Allowance for Doubtful Accounts: Normal balance of this account is credit balance but due to more write off uncollectable
	amount during last period balance in this account become the debit balance.
	At the time of calculation of bad debt for current year if balance in allowance for doubtful account have the credit
	balance than this credit amount is reduces from the current year estimated to be uncollectable amount.
	If balance in doubtful account is debit than this amount is added in current year estimated amount

Solution:
	Amount estimated on the basis of aging of account receivable	$12,500
	Add: Debit balance of allowance for doubtful accounts	$3,500
	Total = Bad Debt Expenses	$16,000


	Answer = Current year bad debt expenses = $ 16,000

ekkarill92 answered 1 year ago

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