At year-end,Chief Company has a balance of $10,000 in accounts receivable of which $1,000 is more than 30 days overdue.Chief has a credit balance of $100 in the allowance for doubtful accounts before any year-end adjustments.Using the aging of accounts receivable method,Chief estimates that 1% of current accounts and 10% of accounts over thirty days are uncollectible.What is the amount of bad debt expense?
A)$90.
B)$190.
C)$290.
D)$100.

Question

Quizplus · Accepted Answer

The amount of bad debt expense is $90. This is calculated by taking the total accounts receivable balance of $10,000 and multiplying it by the estimated uncollectible percentage of 1%. This gives us an estimated uncollectible amount of $100. We then subtract the existing credit balance in the allowance for doubtful accounts of $100, which gives us a bad debt expense of $90.

At Year-End,Chief Company Has a Balance of $10,000 in Accounts