Question

At the end of 2015, Murray State Lenders had a balance in its Allowance for Uncollectible Accounts of $4.500 (credit) before any adjustment. The company estimated its future uncollectible accounts to be $12.000 using the percentage of receivables method. Murray State's adjustment on December 31, 2015, to record its estimated uncollectible accounts included Credit to Allowance for Uncollectible Accounts of $7.500 Credit to Allowance for Uncollectible Accounts of $12.000 Debit to Bad Debt Expense of $7.500 both Band C D 10 29 Suppose that the balance of a company's Allowance for Uncollectible Accounts was $6.200 (credit) at the end of 2015, prior to any adjustments. The company estimated that the total of uncollectible accounts in its accounts receivable was $44,300 at the end of 2015. What amount of bad debt expense would appear in the company's 2015 income statement? 50700 30100 101700 No answer text provided

Answer 1

Solution 1:

Bad debts expense to be recorded for the year = Required balance in allowance account - Existing balance in allowance account

= $12,000 - $4,500 = $7,500

Therefore adjustment to record estimated uncollectible accounts should include "Debit to bad debt expense for $7,500"

Hence 3rd option is correct.

Solution 2:

Amount of bad debts expense to be appeared in 2015 income statement = Required balance in allowance account - Existing balance in allowance account = $44,300 - $6,200 = $38,100

Hence 2nd option is correct.