At the start of the year, Habitat for Humanity reports gross contributions receivable of $8,000 and a related allowance for bad debts of $1,200. During the year, $7,000 of these receivables are collected and the rest are written off. Habitat for Humanity records current year contributions of $200,000, of which $190,000 are collected in cash. Its ending allowance for bad debts balance should be 15% of uncollected receivables. These promises are expected to be collected within one year. What is bad debt expense for the current year?

Question

Quizplus · Accepted Answer

The ending receivables balance is $10,000 so the ending allowance balance should be $1,500. The allowance balance before the bad debt entry is $1,200 - $1,000 = $200 credit, so a $1,300 credit is needed to adjust the allowance balance.

At the Start of the Year, Habitat for Humanity Reports