Ward Company uses the allowance method of accounting for bad debts. The following summary schedule was prepared from an aging of accounts receivable outstanding on December 31 of the current year.

The following additional information is available for the current year:
If Ward bases its estimate of bad debts on the aging of accounts receivable, Bad Debt Expense for the current year ending December 31 is

Question

Ward Company uses the allowance method of accounting for bad debts. The following summary schedule was prepared from an aging of accounts receivable outstanding on December 31 of the current year.

The following additional information is available for the current year:
 If Ward bases its estimate of bad debts on the aging of accounts receivable, Bad Debt Expense for the current year ending December 31 is

Quizplus · Accepted Answer

The aging schedule shows that the total accounts receivable outstanding is $2,400,000, and based on the aging, an estimate of 2% is made for the amount of accounts receivable that will ultimately prove to be uncollectible. This results in a required allowance for doubtful accounts of $48,000 ($2,400,000 x 2%). Since this is the amount needed to adjust the balance of the allowance account to the required level, Bad Debt Expense for the current year should be equal to the necessary adjustment, or $48,000. Therefore, the correct answer is B.

Ward Company Uses the Allowance Method of Accounting for Bad