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21 August, 03:09

The Allowance for Bad Debts has a credit balance of $ 7 comma 500 before the adjusting entry for bad debts expense. After analyzing the accounts in the accounts receivable subsidiary ledger using the agingminusofminus receivables method, the company's management estimates that uncollectible accounts will be $ 14 comma 000. What will be the amount of Bad Debts Expense reported on the income statement?

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  1. 21 August, 03:29
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    The amount of bad debt exp is 7000

    Explanation:

    Allowance for bad debt exp has a credit balance of 7500 before adjusting entry

    Now the management wants to estimate the uncollectible accounts at 14500

    So we have to increase the balance of the allowance account from 7500 to 14500

    Like 14500-7500=7000

    So we need to record the entry by 7000 to increase the amount of the allowance to 14500

    The entry

    Bad debt exp Dr. 7000

    Allowance for doubtful accounts Cr 7000

    Now the bad debt exp will be reported in the income statement by 7000
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