For the year ended December 31, 20X0, Barracks and Bullets Emporium estimated its allowance for doubtful accounts using the year-end aging of accounts receivable. The following data are available $$\begin{array} { | l | r | }
\hline \text { Allowance for doubtful accounts, Jan 120X0 } & \$ 37,000 \
\hline \begin{array} { l }
\text { Estimated uncollectible accounts during 20X0 } \
( 1 \% \text { on credit sales of } \$ 4,000,000 )
\end{array} & \$ 40,000 \
\hline \text { Uncollectible accounts written off, Nov 30 20X0 } & \$ 52,000 \
\hline \text { Estimated uncollectible accounts per aging, Dec 3120X0 } & \$ 74,000 \
\hline
\end{array}$$ After year-end adjustment, the bad debt expense for 20X0 should be
A) $89,000
B) $37,000
C) $126,000
D) $52,000

Question

For the year ended December 31, 20X0, Barracks and Bullets Emporium estimated its allowance for doubtful accounts using the year-end aging of accounts receivable. The following data are available $$\begin{array} { | l | r | } 
\hline \text { Allowance for doubtful accounts, Jan 120X0 } & \$ 37,000 \
\hline \begin{array} { l } 
\text { Estimated uncollectible accounts during 20X0 } \
( 1 \% \text { on credit sales of } \$ 4,000,000 )
\end{array} & \$ 40,000 \
\hline \text { Uncollectible accounts written off, Nov 30 20X0 } & \$ 52,000 \
\hline \text { Estimated uncollectible accounts per aging, Dec 3120X0 } & \$ 74,000 \
\hline
\end{array}$$ After year-end adjustment, the bad debt expense for 20X0 should be
A) $89,000
B) $37,000
C) $126,000
D) $52,000

Quizplus · Accepted Answer

The bad debt expense for 20X0 is calculated by adjusting the allowance for doubtful accounts to the required year-end balance based on the aging of accounts receivable. The beginning balance of the allowance was $37,000, and $52,000 of uncollectible accounts were written off during the year, reducing the allowance. To adjust the allowance to the new required balance of $74,000, an additional $89,000 ($74,000 - $37,000 + $52,000) must be recognized as bad debt expense for the year.

For the Year Ended December 31, 20X0, Barracks and Bullets