At the beginning of the year, Loeb Company's allowance for doubtful accounts is $12,000. During the year, $4,250 was written off as uncollectible. On December 31, Loeb Company used an aging schedule of accounts receivable and determined that $10,530 of accounts receivable would probably be uncollectible.
What is the amount of bad debt expense that should be reported on Loeb Company's income statement for the year?

Question

Quizplus · Accepted Answer

The bad debt expense is calculated as the ending balance of the allowance for doubtful accounts minus the beginning balance, adjusted for any write-offs. Starting with a $12,000 allowance, $4,250 was written off, reducing the allowance to $7,750. To adjust the allowance to the new estimate of $10,530, an additional $2,780 ($10,530 - $7,750) needs to be added as bad debt expense.

At the Beginning of the Year, Loeb Company's Allowance for Doubtful