Question

Under the allowance method, the uncollectible accounts for the year is estimated to be $40,000. If the balance for the allowance for doubtful accounts is a $9,000 debit before adjustment, what is the amount of bad debt expense for the period?

a. $9,000
b. $31,000
c. $40,000
d. $49,000

Answer 1

The bad debt expense for the period is calculated by adding the existing debit balance in the allowance for doubtful accounts and the estimated uncollectible accounts for the year, which results in $49,000. The correct answer is d. $49,000.

Step-by-step explanation:

The question pertains to accounting for uncollectible accounts under the allowance method. When the allowance for doubtful accounts has a debit balance of $9,000 before adjustment, and the estimated uncollectible accounts for the year is $40,000, the bad debt expense for the period must bring the allowance account to the correct new balance. Therefore, the bad debt expense will be the sum of the existing debit balance and the new estimate. This means:

Bad debt expense = Existing debit balance + New estimate

Bad Debt Expense = $9,000 + $40,000

Bad Debt Expense = $49,000

The correct answer is d. $49,000.