Question

Suppose that the balance of a company's Allowance for Uncollectible Accounts was $6,200 (credit) at the end of the year, prior to any adjustments. The company estimated that the total of uncollectible accounts in its accounts receivable was $44,300 at the end of the year. What amount of bad debt expense would appear in the company's year-end income statement?

Answer 1

Answer:

$38,100

Explanation:

Total bad debt expense = estimated uncollectible accounts - allowance for uncollectible accounts = $44,300 - $6,200 = $38,100

Allowance for uncollectible accounts represents the amount of accounts receivable that the company doesn't expect to collect. At the end of the year, this account must be closed by debiting bad debt expense.