Question

On December 31, 2021, Larry's Used Cars had balances in Accounts Receivable and Allowance for Uncollectible Accounts of $70,000 and $1,250, respectively. During 2022, Larry's wrote off $2,675 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $5,650 at December 31, 2022. Bad debt expense for 2022 would be:

Answer 1

$7,075

Step-by-step explanation:

Bad debt expense occur when the account receivables are no longer collectible due to inability to fulfill financial obligations by the customers in which it must be recorded and accounted for every time a company prepares its financial statements

Bad debt expense = $5,650− ($1,250 − $2,675) = $7,075

Therefore Bad debt expense for 2022 would be $7,075

Answer 2

December 31, 2022 Bad debts $ 2975

Step-by-step explanation:

On December 31, 2021, Accounts Receivable $70,000

Allowance for Uncollectible Accounts $1,250

During 2022, Bad Debts $2,675

Allowance for Uncollectible Accounts $5,650 at December 31, 2022

Bad debt expense for 2022 would be

December 31, 2021

Allowance for Uncollectible Accounts $1,250

During 2022, Bad Debts $2,675

Required Adjustment $ 1425

December 31, 2022 Bad debts $ 2975

Allowance for Uncollectible Accounts $5,650 adjusted Balance

Allowance for Uncollectible Accounts Written Off $2,675

Required Adjustment $ 2975