Upon completing an aging analysis of accounts receivable,the accountant for Rosco Works prepared an aging of accounts receivable and estimated that $5,000 of the $98,000 accounts receivable balance would be uncollectible.The allowance for doubtful accounts had a $400 debit balance at year-end prior to adjustment.What is the amount of bad debt expense?
A)$5,000.
B)$5,400.
C)$4,600.
D)$400.

Question

Quizplus · Accepted Answer

The estimated uncollectible amount of $5,000 should be added to the current balance of the allowance for doubtful accounts. Therefore, the required ending balance of the allowance for doubtful accounts is $5,000 + $400 = $5,400. The difference between the required ending balance and the current balance is the bad debt expense, which is $5,400 - $400 = $5,000. Therefore, the bad debt expense is $5,000.

Upon Completing an Aging Analysis of Accounts Receivable,the Accountant for Rosco