On average,5% of total accounts receivable has been uncollectible in the past.At the end of the year,the current balance of accounts receivable is $100,000.The allowance for doubtful accounts has an unadjusted debit balance of $500 using the aging of accounts receivable method.Credit sales during the year were $150,000.The estimated bad debt expense is:
A)$4,500.
B)$5,000.
C)$5,500.
D)$7,000.

Question

Quizplus · Accepted Answer

The estimated bad debt expense is 5% of $100,000, which is $5,000. Since there is already a $500 debit balance in the allowance for doubtful accounts, the bad debt expense needs to be $5,500 to adjust the allowance to the correct estimated amount.

On Average,5% of Total Accounts Receivable Has Been Uncollectible in the Past.At