A company's unadjusted trial balance at the end of the year includes the following: The company uses the aging of accounts receivable method.Its estimate of uncollectible receivables resulting from the aging analysis equals $5,800.What is the amount of Bad Debt Expense to be recorded for the year?

Question

A company's unadjusted trial balance at the end of the year includes the following:  The company uses the aging of accounts receivable method.Its estimate of uncollectible receivables resulting from the aging analysis equals $5,800.What is the amount of Bad Debt Expense to be recorded for the year?

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
= $5,800 − ($1,000)= $6,800

A Company's Unadjusted Trial Balance at the End of the Year