Question

A company's unadjusted trial balance at the end of the year includes the following:

Accounts receivable= $104,000
Unadjusted credit balance in Allowance for Doubtful Accounts=$1,600
The company uses the aging of accounts receivable method. Its estimate of uncollectible receivables resulting from the aging analysis equals $8,300. What is the amount of Bad Debt Expense to be recorded for the year?
a. $8,300
b. $9,900
c. $1,600
d. $6,700

Answer 1

To calculate the Bad Debt Expense for the year, subtract the existing allowance balance of $1,600 from the new estimate of $8,300 from the aging analysis, which equals $6,700. This is the required adjustment and thus the Bad Debt Expense is to be recorded.

Step-by-step explanation:

The question asks for the calculation of the Bad Debt Expense for the year, using the aging of accounts receivable method. The company's unadjusted trial balance shows an Accounts Receivable balance of $104,000 and an existing credit balance in the Allowance for Doubtful Accounts of $1,600. The aging analysis estimates uncollectible receivables to be $8,300.

To calculate the Bad Debt Expense, you adjust the existing allowance to match the new estimate. The expense to record is the difference between the estimated uncollectible receivables and the existing allowance balance: $8,300 (new estimate) - $1,600 (existing allowance) = $6,700. Therefore, Bad Debt Expense for the year that needs to be recorded is $6,700.