Pauline Company estimates the allowance for doubtful accounts by aging its accounts receivable. At the end of 2012, the balance in the allowance account was $50,000. During 2013, the company wrote off $5,000 and collected a $3,000 receivable that had been previously written off as uncollectible. At the end of 2013, the aging schedule indicated that the balance of the allowance for doubtful accounts should be $64,000. What is the bad debt expense for 2013?

Question

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The allowance account needs to be adjusted to $64,000 at the end of 2013. Starting with $50,000, subtract the $5,000 write-off, add back the $3,000 recovery, and then calculate the bad debt expense needed to reach $64,000. This results in a bad debt expense of $16,000.

Pauline Company Estimates the Allowance for Doubtful Accounts by Aging