Financial Accounting: Adjusted Account Balances

Question

Assume the Murtha Company reported the following adjusted account balances at year-end.


                                                       2016                           2015
            Accounts Receivable     $1,740,200                 $1,390,920
   Allowance for Doubtful Accounts (97,000)                     (80,800)
        Accounts Receivable, Net  $1,643,200                  $1,310,120


Assume the company recorded no write-offs or recoveries during 2016. What was the amount of Bad Debt Expense reported in 2016?
$97,000.
$80,800.
$16,200.
$32,400.

Answer 1

$16,200,

No write off in the accounts receivable for 2015 must have been carried forward $80, 800 due to Allowance for Doubtful Accounts for that year [i.e., 2015] into  Allowance for Doubtful Accounts in 2016

 

The total of Allowance for Doubtful Accounts in 2016 accrued $97,000

Hence the bad debt accrued in 2016 must be =$97,000- $80, 800 =$16,200

Answer 2

Bad Debt Wight off

What are the three things that will affect the allowance account?

Wright off will reduce it,

Allowance for D/A     $100
          Acct Rec                 $100

 

Recovery will increase it
  Cash          $250
            Allowance     $250

Bad Debt Expense will increase it

Bad Debt Expense        $500
        Allowance for DA            $500

Neither of the first two have happned (given)

Allowance for Doubitfull accounts Beginning balance Credit $80,800
Allowance for DA Credit $16,200
End balance Credit $97,000

Journal Entry
Bad Debt Expense      $16,200
         Allowance for D/A          $16,200