Upon completing an aging analysis of accounts receivable, the accountant for Rosco Works prepared and 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. How much is bad debt expense?
A) $5,000.
B) $5,400.
C)$4,600.
D)$400.

Question

Quizplus · Accepted Answer

The estimated amount of uncollectible accounts is $5,000, which means that the bad debt expense should be increased by this amount.

To adjust the allowance account, the debit balance of $400 should also be taken into account.

Therefore, the calculation for bad debt expense is:

Estimated uncollectible accounts ($5,000) + existing debit balance in allowance ($400) = $5,400 (Option B)

Upon Completing an Aging Analysis of Accounts Receivable, the Accountant