Herman Company has a debit balance of $5,000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. Based on review and aging of its accounts receivable at the end of the year, Herman estimates that $70,000 of its receivables are uncollectible. The amount of bad debt expense which should be reported for the year is:

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The bad debt expense for the year should be the estimated uncollectible accounts receivable, which in this case is $70,000. Since the Allowance for Doubtful Accounts already has a debit balance of $5,000, the adjustment needed to bring the allowance balance to the estimated uncollectible amount is $75,000 ($70,000 - $5,000). Therefore, the amount of bad debt expense that should be reported for the year is $75,000.

Herman Company Has a Debit Balance of $5,000 in Its