Question

At the end of 2018, we have a credit balance of $10,000 in allowance for doubtful accounts before the adjusting entry for bad debts expense. After analyzing the accounts in the accounts receivable using the aging of receivables method, the company's management estimates that uncollectible accounts will be $30,000. What will be the amount of bad debts expense reported on the income statement

Answer 1

$20,000

Step-by-step explanation:

From the question above

At the end of 2018, there was a credit balance of $10,000 in allowance for the doubtful accounts.

After proper screening of the account receivable through the use of a method known as 'aging of receivables method' the management of the company estimated that the uncollectible accounts will be $30,000

Therefore, the amount of bad debts expense recorded on the income statement can be calculated as follows

= $30,000-$10,000

= $20,000

Hence the amount of bad debts expense that was recorded on the income statement is $20,000