For the year ended December 31, 2020, Ferguson Corp. estimated its allowance for doubtful accounts using the year-end aging of accounts receivable. Additional information for calendar 2020 follows: $\begin{array}{llcc}
\text {Allowance for doubtful accounts, beginning. } & \$74,000 \
\text {Estimated uncollectible accounts during 2020 } &\
\text { $ (1 \% $ of credit sales of $ \$ 8,000,000) $ } &80,000\
\text { Uncollectible accounts written off during year. } &104,000\
\text {Estimated uncollectible accounts per year-end aging. } &148,000\
\end{array}$
For the year ended December 31, 2020, Ferguson's bad debt expense should be

Question

For the year ended December 31, 2020, Ferguson Corp. estimated its allowance for doubtful accounts using the year-end aging of accounts receivable. Additional information for calendar 2020 follows: $\begin{array}{llcc}
  \text {Allowance for doubtful accounts, beginning.  } & \$74,000 \
 \text {Estimated uncollectible accounts during 2020  } &\
 \text { $ (1 \% $ of credit sales of $ \$ 8,000,000) $ } &80,000\
 \text { Uncollectible accounts written off during year. } &104,000\
 \text {Estimated uncollectible accounts per year-end aging.  } &148,000\
\end{array}$
 For the year ended December 31, 2020, Ferguson's bad debt expense should be

Quizplus · Accepted Answer

Ferguson Corp. estimated its allowance for doubtful accounts using the year-end aging of accounts receivable. Therefore, the estimated uncollectible accounts at year-end is considered in the calculation of the bad debt expense.

The calculation of the bad debt expense is as follows:

Beginning allowance for doubtful accounts + estimated uncollectible accounts during 2020 - uncollectible accounts written off during the year + estimated uncollectible accounts per year-end aging = bad debt expense

$74,000 + $80,000 - $104,000 + $148,000 = $178,000

Therefore, the bad debt expense for the year ended December 31, 2020, should be $178,000 (choice C).

For the Year Ended December 31, 2020, Ferguson Corp For the Year Ended December 31, 2020, Ferguson's Bad Debt