Question

Blue 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 $ 800. During the year Blue wrote off uncollectible receivables of $ 1 comma 700. Blue recorded Bad Debts Expense of $ 2 comma 600. What is Blue's ​year-end balance in Allowance for Bad​ Debts? A. $ 3 comma 400 B. $ 4 comma 300 C. $ 1 comma 700 D. $ 900

Answer 1

c. $1,700

Step-by-step explanation:

The computation of balance in Allowance for Bad​ Debts is shown below:-

Beginning Allowance for bad debts = $800

Current period bad debts expenses = $2,600

Written off during the period = $1,700

Allowance for bad debts, at year end = Beginning Allowance for bad debts + Current period bad debts expenses - Written off during the period

= $800 + $2,600 - $1,700

= $1,700

Therefore for computing the Allowance for bad debts, at year end we simply applied the above formula.