Using the aging-of-accounts-receivable method to estimate uncollectible receivables, CMU Corporation estimates that $3,750 of its accounts receivable will be uncollectible. Prior to adjustment, the Allowance for Uncollectible Accounts has a credit balance of $600. Bad debt expense to be reported on the income statement is:

Question

Quizplus · Accepted Answer

To calculate the bad debt expense, we need to consider the adjustment needed to bring the allowance for uncollectible accounts to its estimated balance.

Allowance for Uncollectible Accounts after adjustment = Estimated uncollectible accounts receivable - Current credit balance of allowance for uncollectible accounts
Allowance for Uncollectible Accounts after adjustment = $3,750 - $600
Allowance for Uncollectible Accounts after adjustment = $3,150

Therefore, the bad debt expense to be reported on the income statement is $3,150 (Option B).

Using the Aging-Of-Accounts-Receivable Method to Estimate Uncollectible Receivables, CMU Corporation