On December 31,2015,Larry's Used Cars had balances in Accounts Receivable and Allowance for Uncollectible Accounts of $53,600 and $1,325,respectively.During 2016,Larry's wrote off $1,465 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $1,280 at December 31,2016.Bad debt expense for 2016 would be:

Question

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First, we need to calculate the beginning balance of the Allowance for Uncollectible Accounts.

Beginning balance of the Allowance for Uncollectible Accounts = $1,325

Next, we need to adjust the Allowance for Uncollectible Accounts to its desired ending balance.

Desired ending balance of the Allowance for Uncollectible Accounts = $1,280

Adjustment to the Allowance for Uncollectible Accounts = $1,325 - $1,280 = $45

This adjustment is necessary because we want the Allowance for Uncollectible Accounts to reflect an estimate of the accounts receivable that will not be collected.

Next, we need to calculate the total amount of bad debt expense for the year 2016.

Total bad debt expense for the year 2016 = Beginning balance of the Allowance for Uncollectible Accounts + Bad debt expense - Write-offs

Total bad debt expense for the year 2016 = $1,325 + Bad debt expense - $1,465

Total bad debt expense for the year 2016 = Bad debt expense - $140

Solving for Bad debt expense:

Bad debt expense = Total bad debt expense for the year 2016 + $140

Bad debt expense = $1,280 + $140

Bad debt expense = $1,420

Therefore, the answer is C ($1,420).

On December 31,2015,Larry's Used Cars Had Balances in Accounts Receivable