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:

Question

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The Allowance for Doubtful Accounts needs to have a credit balance of $70,000 to reflect the estimated uncollectible receivables. Since it currently has a debit balance of $5,000, an adjustment of $75,000 is needed to achieve the desired credit balance.

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