Rimrock,Inc.used the aging of accounts receivable method.At December 31,management determined that the net realizable value of accounts receivable was $608,000.The balance in Accounts Receivable was $768,000 and the unadjusted credit balance in Allowance for Doubtful Accounts was $32,000.What was the amount of Bad Debt Expense for the year?
A)$192,000
B)$128,000
C)$160,000
D)$32,000

Question

Quizplus · Accepted Answer

First,you need to determine the estimated uncollectible accounts,which becomes the adjusted balance of the Allowance for Doubtful Accounts
Net realizable value = Accounts Receivable − Adjusted balance in Allowance for Doubtful Accounts
Adjusted balance in Allowance for Doubtful Accounts = Accounts Receivable − Net realizable value
= $768,000 − $608,000 = $160,000
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
= $160,000 − $32,000 = $128,000