Using the aging method of accounts receivable method,$5,000 of the company's Accounts Receivable are estimated to be uncollectible.At the end of the year,the balance of Accounts Receivable is $100,000 and the unadjusted credit balance of the Allowance for Doubtful Accounts is $500.Credit sales during the year totaled $150,000.What is the current year's Bad Debt Expense?
A)$4,500
B)$5,000
C)$7,000
D)$7,500

Question

Quizplus · Accepted Answer

The aging of accounts receivable method focuses on estimating the ending balance to be reported in the Allowance for Doubtful Accounts.To compute the amount of the adjustment,you must determine how much to increase (credit)the Allowance for Doubtful Accounts to reach the desired adjusted balance.
Ending balance in Allowance for Doubtful Accounts = Unadjusted credit (debit)balance in Allowance for Doubtful Accounts + Bad Debt Expense
Bad Debt Expense = Ending balance in Allowance for Doubtful Accounts − Unadjusted ending credit (debit)balance in Allowance for Doubtful Accounts
= $5,000 − $500 = $4,500

Using the Aging Method of Accounts Receivable Method,$5,000 of the Company's