Question

During the year, credit sales amounted to $800,000. cash collected on credit sales amounted to $760,000 and $18,000 has been written off. at the end of the year, company adjusted for bad debts expense using the aging method. the amount estimated as uncollectible was $25,000. the ending balance in bad debts expense would be:

Answer 1

The ending balance in bad debts expense cannot be determined with the information given, as we need the beginning balance in the allowance for doubtful accounts and the method of adjustment to calculate it accurately.

Step-by-step explanation:

Calculating the Ending Balance in Bad Debts Expense

To calculate the ending balance in bad debts expense, we begin by considering the amount of credit sales, the cash collected, and the amount written off during the year. Given that credit sales were $800,000 and cash collected on these sales was $760,000, this implies that not all credit sales were collected in cash. An amount of $18,000 was written off, which could represent accounts that were deemed uncollectible and thus removed from the books. Additionally, the aging method was used to estimate that $25,000 would be uncollectible at the end of the year.

However, the question asks for the ending balance in bad debts expense, which is not directly given by the information provided. Typically, the allowance for doubtful accounts would be adjusted to reflect the estimated uncollectible amount, which affects bad debts expense indirectly. Since we do not have the beginning balance of the allowance for doubtful accounts, we cannot determine the exact bad debts expense for the period based on the given data alone.

Normally, the bad debts expense for the period would be computed by adjusting the allowance for doubtful accounts to match the new estimate, with the difference being recorded as the bad debts expense. However, without the beginning balance of the allowance or the clear method of adjustment (whether the uncollectible estimate is an addition or a new target balance), it's not possible to provide a definitive answer to this question.

Answer 2

Bad debt is defined as a debt that is no longer collectible and therefore worthless to the creditor. In this case, the uncollectible is $25,000 therefore the answer to this problem is:

Ending balance in bad debts expense = $25,000