At the start of 20x4, Colonial Designs' Allowance for Uncollectibles balance is €120,000.During 20x4, Colonial Designs' credit sales were €5,000,000; of this amount, it expected 2% will become uncollectible.During 20x4, Colonial Designs wrote off €70,000 of accounts receivable.At the end of 20x4, Colonial Designs estimates, based on an aging of accounts, that the ending balance in the Allowance for Uncollectibles should be €130,000.
A)Allowance for Uncollectibles .................... 80,000
Accounts Receivable, net .........................80,000
B)Bad Debt Expense ............................ 70,000
Accounts Receivable, net .......................... 70,000
C)Allowance for Uncollectibles ..................... 70,000
Bad Debt Expense...........................70,000
D)Bad Debt Expense ........................... 80,000
Allowance for Uncollectibles ......................... 80,000
E)Allowance for Uncollectibles ..................... 80,000
Accounts Receivable, gross.....................80,000

Question

At the start of 20x4, Colonial Designs' Allowance for Uncollectibles balance is €120,000.During 20x4, Colonial Designs' credit sales were €5,000,000; of this amount, it expected 2% will become uncollectible.During 20x4, Colonial Designs wrote off €70,000 of accounts receivable.At the end of 20x4, Colonial Designs estimates, based on an aging of accounts, that the ending balance in the Allowance for Uncollectibles should be €130,000.
A)Allowance for Uncollectibles .................... 80,000 
Accounts Receivable, net .........................80,000
B)Bad Debt Expense ............................ 70,000 
Accounts Receivable, net .......................... 70,000
C)Allowance for Uncollectibles ..................... 70,000 
Bad Debt Expense...........................70,000
D)Bad Debt Expense ........................... 80,000 
Allowance for Uncollectibles ......................... 80,000
E)Allowance for Uncollectibles ..................... 80,000 
Accounts Receivable, gross.....................80,000

Quizplus · Accepted Answer

The entry to record the estimated bad debt expense for the year is a debit to Bad Debt Expense and a credit to Allowance for Uncollectibles. Since the estimate at the end of the year is €130,000 and the beginning balance was €120,000, the expense for the year would be €10,000 (130,000 - 120,000). Therefore, the journal entry to record the bad debt expense for the year would be:

Bad Debt Expense.......................................... €80,000
Allowance for Uncollectibles................................ €80,000

This would bring the ending balance in the Allowance for Uncollectibles to €130,000 (€120,000 beginning balance + €80,000 expense - €70,000 write-offs). Therefore, choice D is the best answer.

At the Start of 20x4, Colonial Designs' Allowance for Uncollectibles