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

Quizplus · Accepted Answer

The bad debt expense should be equal to the estimated amount of uncollectible accounts, which is $70,000. However, since the Allowance for Doubtful Accounts already has a debit balance of $5,000, the amount of bad debt expense that needs to be recorded in order to bring the allowance account to a level that reflects the estimated uncollectible accounts is $75,000 ($70,000 + $5,000). Therefore, the correct answer is D.

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