The following information is from the 2019 records of Fast Lane Racing Gear: $$\begin{array} { | l | l | }
\hline \text { Accounts receivable, December 31, 2019 } & \$ 40,000 \text { (debit) } \
\hline \text { Allowance for Bad Debts, December 31,2019 prior to adjustment } & 2000 \text { (debit) } \
\hline \text { Net credit sales for 2019 } & 175,000 \
\hline \text { Accounts written off as uncollectible during 2019 } & 18,000 \
\hline \text { Cash sales during 2019 } & 30,000 \
\hline
\end{array}$$ Bad debts expense is estimated by the aging-of-receivables method.Management estimates that $9000 of accounts receivable will be uncollectible.Calculate the ending balance of Allowance for Bad Debts,after the adjustment for bad debts expense,at December 31,2019.
A) $5250
B) $13,000
C) $8000
D) $9000

Question

The following information is from the 2019 records of Fast Lane Racing Gear: $$\begin{array} { | l | l | } 
\hline \text { Accounts receivable, December 31, 2019 } & \$ 40,000 \text { (debit) } \
\hline \text { Allowance for Bad Debts, December 31,2019 prior to adjustment } & 2000 \text { (debit) } \
\hline \text { Net credit sales for 2019 } & 175,000 \
\hline \text { Accounts written off as uncollectible during 2019 } & 18,000 \
\hline \text { Cash sales during 2019 } & 30,000 \
\hline
\end{array}$$ Bad debts expense is estimated by the aging-of-receivables method.Management estimates that $9000 of accounts receivable will be uncollectible.Calculate the ending balance of Allowance for Bad Debts,after the adjustment for bad debts expense,at December 31,2019.
A) $5250
B) $13,000
C) $8000
D) $9000

Quizplus · Accepted Answer

The ending balance of Allowance for Bad Debts after adjustment is calculated by taking the estimated uncollectible accounts receivable ($9,000) and adjusting for the existing balance in the allowance account. Since the allowance account had a debit balance of $2,000 (which is unusual as it typically has a credit balance), this amount needs to be cleared out and then the estimated uncollectible amount added. The correct ending balance is simply the estimated uncollectible amount of $9,000, as the debit balance in the allowance account indicates a previous overestimation of bad debts, which is corrected before adding the new estimate.

The Following Information Is from the 2019 Records of Fast