Question

On December 31, 2021, Coolwear Inc. had balances in Accounts Receivable and Allowance for Uncollectible Accounts of $48,000 and $1,950, respectively. During 2022, Coolwear wrote off $675 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $5,500 at December 31, 2022. Bad debt expense for 2022 would be:

Answer 1

Bad debt expense for 2022 would be $4,225

Step-by-step explanation:

Bad debt expense is the expense incurred by a company when a debtor of the company is unable to fulfuill their obligation to the company.

Bad debt expense for Coolwear Inc. would be calculated by

=Allowance for Uncollectible Accounts - (Uncollectible Accounts Balance - Accounts Receivable Writeoff)

Bad debt expense = $5,500 - ($1,950 - $675) = $4,225