At the beginning of 2019,Gourmet Cupcakes Company has the following ledger balances: Accounts Receivable $45,000 (Debit)
Allowance for Bad Debts $6000 (Credit)
During the year,credit sales amounted to $820,000.Cash collected on credit sales amounted to $780,000,and $18,000 has been written off.Gourmet Cupcakes uses the aging-of-receivables method to record bad debts expense.The estimate of uncollectible accounts was $28,000.The ending balance in the Allowance for Bad Debts is ________.

Question

Quizplus · Accepted Answer

The calculation of the ending balance in the Allowance for Bad Debts is as follows:
Beginning balance: $6,000 (Credit)
Add: Bad debts expense = Estimated uncollectible accounts = $28,000
Less: Write-offs = $18,000
Ending balance = Beginning balance + Bad debts expense - Write-offs
= $6,000 + $28,000 - $18,000
= $16,000 (Credit)
Therefore, the ending balance in the Allowance for Bad Debts is $16,000 (Credit). However, this is not one of the answer choices. The closest option is C, $28,000, which represents the estimated uncollectible accounts. It is important to note that the balance in the Allowance for Bad Debts does not represent the actual amount of bad debts, but rather an estimate of the amount that is likely to be uncollectible.

At the Beginning of 2019,Gourmet Cupcakes Company Has the Following