Question

Upon completing an aging analysis of accounts receivable, the accountant for Rosco Works prepared an aging of accounts receivable and estimated that $6,700 of the $99,700 accounts receivable balance would be uncollectible. The allowance for doubtful accounts had a $570 debit balance at year-end prior to adjustment. What is the amount of bad debt expense?

Answer 1

$7,270

Step-by-step explanation:

Allowance for doubtful accounts is a contra asset account. It has credit balance and need to be adjusted against the receivable account balance to show net receivable amount on the balance sheet.

As $6,700 of uncollectible accounts receivables are estimated, but allowance account has a debit balance of $570.

Bad Debt Expense for the year = Estimated uncollectible accounts receivables + Year end debit balance of Allowance for doubtful accounts

Bad Debt Expense for the year = $6,700 + $570

Bad Debt Expense for the year = $7,270

Answer 2

-$7,270

Step-by-step explanation:

Accounts receivable is the amount that is owed to the business by various parties that is due within a particular period.

In this instance there was an aging analysis done that estimated that $6,700 will be uncollectible. This will result in a bad debt expense of -$6,700.

Before now there was a balance of -$570 in allowance for doubtful accounts. Meaning there was a debit balance attributed to uncollected debt.

The total debt balance will now be -6,700-570 = -$7,270