Question

Brickman Corporation uses the allowance method to account for uncollectible receivables. At the beginning of the year, Allowance for Bad Debts had a credit balance of $1000. During the year, Brickman wrote off uncollectible receivables of $2,100. Brickman recorded Bad Debt Expense of $2,700. What is Brickman's year-end balance in Allowance for Bad Debts?

A: $1,600
B: $4,800
C: $3,700
D: $600

Answer 1

To determine the year-end balance of the Allowance for Bad Debts account at Brickman Corporation, you adjust the beginning credit balance by additions for Bad Debt Expense and subtractions for write-offs. The correct year-end balance is A)$1,600.

Step-by-step explanation:

The question pertains to calculating the year-end balance in the Allowance for Bad Debts account using the allowance method. To determine this, we start with the beginning balance and adjust for the activities during the year.

Starting with a credit balance of $1,000, Brickman Corporation then writes off $2,100 in uncollectible receivables, which decreases the balance in the Allowance for Bad Debts account.

Next, Brickman records Bad Debt Expense of $2,700, which increases the Allowance for Bad Debts account.

The calculation is as follows:
Beginning balance (credit) + Bad Debt Expense - Write-offs
$1,000 + $2,700 - $2,100 = $1,600

Therefore, the year-end balance in the Allowance for Bad Debts account is $1,600 (Option A).