Question

Castle Company provides estimates for its uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $18,080 at the beginning of 2021 and a $24,010 credit balance at the end of 2021 (after adjusting entries). If the direct write-off method had been used to account for uncollectible accounts (bad debt expense equals actual write-offs), the income statement for 2021 would have included bad debt expense of $18,700 and revenue of $3,800 from the collection of previously written off bad debts. Required: Determine bad debt expense for 2021 according to the allowance method.

Answer 1

Bad debt expense for 2021 according to the allowance method is $20,830

Step-by-step explanation:

We know that,

Ending balance of Allowance for Uncollectible Accounts = Beginning balance of Allowance for Uncollectible Accounts + 2021 bad debts + write off amount - collection made

$24,010 = $18,080 + 2021 bad debts + $3,800 - $18,700

$24,010 = $3,180 + 2021 bad debts

So, the 2021 bad debts is $24,010 - $3,180 = $20,830

We considered all the items for the calculation which is given in the question