Question

On December 31, 2021, Coolwear Inc. had balances in Accounts Receivable and Allowance for Uncollectible Accounts of $44,500 and $1,800, respectively. During 2022, Coolwear wrote off $650 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $5,000 at December 31, 2022. Bad debt expense for 2022 would be:

Answer 1

Bad debt expense for 2022 would be $3,850

Step-by-step explanation:

Bad debt expenses are expenses incurred by a company as a result of debt owed to it by it's debtors.It therefore means that debtors are not able to pay back the money owed to the company.

Bad debt expense for Coolwear Inc would be =

Allowance for uncollectible accounts - (Uncollectible accounts balance - Accounts receivable written off)

= $5,000 - ( $1,800 - $650)

= $5000 - $1,150

= $3,850