Franks Company has a debit balance of $3,000 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, Franks estimates that $50,000 of its receivables are uncollectible. The amount of bad debts expense which should be reported for the year is:
A) $3,000
B) $47,000
C) $50,000
D) $53,000

Question

Quizplus · Accepted Answer

The bad debts expense should be the estimated amount of uncollectible accounts, which in this case is $50,000. Since the allowance for doubtful accounts already has a debit balance of $3,000, the company needs to increase the balance in the allowance account by $50,000 - $3,000 = $47,000. Therefore, the total bad debts expense reported for the year is $47,000 + $3,000 = $53,000.

Franks Company Has a Debit Balance of $3,000 in Its