Question

At the end of the year, the unadjusted balance in the Allowance for Uncollectible Accounts is $951 credit and Accounts Receivable $97,250 debit balance. What is the amount should be debited to Bad Debt Expense, assuming 6% of outstanding accounts receivable at the end of the year is uncollectable?

Answer 1

The correct answer is $4,884.

Step-by-step explanation:

According to the scenario, the given data are as follows:

Account Receivable ( debit) = $97,250

Uncollectable accounts (credit) = $951

Uncollectable percentage = 6%

So, the amount of bad debt can be calculated using the following formula:

Firstly, we calculate the amount that will be uncollectable at the end of the year:

= Account Receivable ( debit) × uncollectable percentage

= $97,250 × 6%

= $5,835

As uncollectable accounts have the credit of $951, then

= $5,835 - $951

= $4,884

Hence, the amount should be debited to Bad Debt Expense is $4,884