Holtzman Corporation had a 1/1/07 balance in the Allowance for Doubtful Accounts of $10,000.During 2007, it wrote off $7,200 of accounts and collected $2,100 on accounts previously written off.The balance in Accounts Receivable was $200,000 at 1/1 and $240,000 at 12/31.At 12/31/07, Holtzman estimates that 5% of accounts receivable will prove to be uncollectible.What is Bad Debt Expense for 2007?

Question

Quizplus · Accepted Answer

Bad Debt Expense for 2007 = (Estimated uncollectible accounts) - (Allowance for Doubtful Accounts at 12/31/07)
Estimated uncollectible accounts = 5% of $240,000 = $12,000
Allowance for Doubtful Accounts at 12/31/07 = (Allowance for Doubtful Accounts at 1/1/07) + (Bad Debt Expense for 2007) - (Accounts written off during 2007) + (Collections on accounts previously written off)
Allowance for Doubtful Accounts at 12/31/07 = $10,000 + B - $7,200 + $2,100
$10,900 = B
Therefore, Bad Debt Expense for 2007 = $10,900 - $10,000 = $9000 or $7,100 (rounded to the nearest dollar).

Holtzman Corporation Had a 1/1/07 Balance in the Allowance for Doubtful