The following data are from the company's records for the year ended December 31:

-Refer to Accelerated Solutions. If the aging method is used to estimate bad debts, what amount should be recorded as bad debt expense?

Question

The following data are from the company's records for the year ended December 31:
 
-Refer to Accelerated Solutions. If the aging method is used to estimate bad debts, what amount should be recorded as bad debt expense?

Quizplus · Accepted Answer

The aging method estimates the amount of bad debts by analyzing the age of the company's accounts receivable balances. Based on the data provided, it can be inferred that the company has $2,000,000 in accounts receivable, and the aging analysis shows that $1,988,000 is expected to be collected. This means that $12,000 is estimated to be uncollectible. Since the question asks for bad debt expense, not the allowance for doubtful accounts, the full estimated amount of $12,000 should be recorded as bad debt expense. Therefore, the correct answer is D) $25,000, which is the amount of accounts receivable written off during the year ($13,000) plus the estimated bad debt expense ($12,000).

The Following Data Are from the Company's Records for the Year