Financial Accounting Question: Bad Debt Expense?

Question

Using the aging method of accounts receivable method, $5,900 of the company’s Accounts Receivable are estimated to be uncollectible. At the end of the year, the balance of Accounts Receivable is $109,000 and the unadjusted credit balance of the Allowance for Doubtful Accounts is $680. Credit sales during the year totaled $168,000. What is the current year’s Bad Debt Expense?

$7,900.
$5,220.
$5,900.
$8,580.

Answer 1

In aging method uncollectible is allowance for doubtful accounts for calculating credit balance adjustment. Generally this kind of credit entry corresponds to bad debts entry on debit side.

 

In the current year Credit sales= $168,000

In the current year Uncollectible= $5,900 this includes  $680 from the year end's Allowance for Doubtful Accounts

 Hence current years's bad debt= $5,900 - $680= $5,220