Lebanon Ltd. prepared an aging of its accounts receivable at December 31, 2020 and determined that the net realizable value of the receivables was $290,000. Additional information for calendar 2020 follows: Allowance for doubtful accounts, beginning. .........................................$\$ 34,000$
Uncollectible account written off during year.......................................... 23,000
Accounts receivable, ending.................................................................... 320,000
Uncollectible accounts recovered during year. ........................................5,000For the year ended December 31, 2020, Lebanon's bad debt expense should be

Question

Lebanon Ltd. prepared an aging of its accounts receivable at December 31, 2020 and determined that the net realizable value of the receivables was $290,000. Additional information for calendar 2020 follows: Allowance for doubtful accounts, beginning. .........................................$\$ 34,000$
 Uncollectible account written off during year.......................................... 23,000 
Accounts receivable, ending.................................................................... 320,000
 Uncollectible accounts recovered during year. ........................................5,000For the year ended December 31, 2020, Lebanon's bad debt expense should be

Quizplus · Accepted Answer

The bad debt expense can be calculated by adjusting the beginning allowance for doubtful accounts for the write-offs and recoveries, then setting it to match the required ending allowance to reach the net realizable value. Beginning allowance is $34,000, write-offs are $23,000, and recoveries are $5,000. The required ending allowance is the difference between the ending accounts receivable ($320,000) and the net realizable value ($290,000), which is $30,000. The calculation is as follows: $34,000 - $23,000 (write-offs) + $5,000 (recoveries) = $16,000 (adjusted beginning allowance). To reach the required ending allowance of $30,000, an additional $14,000 (i.e., $30,000 - $16,000) must be recognized as bad debt expense.

Lebanon Ltd $34,000\$ 34,000$34,000 Uncollectible Account Written Off During Year

Lebanon Ltd $\$ 34,000$ Uncollectible Account Written Off During Year