Caroline's Collectibles estimates its uncollectible accounts by aging its accounts receivable and applying percentages to various aged categories of accounts. Caroline's Collectible computes a total of $6,720 in estimated losses as of December 31, 2016. Its Accounts Receivable account has a balance of $ 225,600 and its Allowance for Uncollectible Accounts has an unused balance of $960 before adjustment at December 31, 2016.
How much is bad debt expense that Caroline's Collectibles will report in 2016?

Question

Quizplus · Accepted Answer

To bring the allowance to the desired balance of $6,720, the company will need to increase the allowance account by $5,760 (or $6,720 - $ 960) resulting in bad debt expense of that same amount.

Caroline's Collectibles Estimates Its Uncollectible Accounts by Aging Its Accounts