Question

alderwood estimates bad debt expense assuming that 1.5% of credit sales have historically been uncollectible. what is the balance in the allowance for doubtful accounts after bad debt expense is recorded?

Answer 1

After accounting for bad debt expense, the remaining amount in the allowance for doubtful accounts is $7,950.

What is bad debt?

Bad debt, sometimes referred to as uncollectible accounts expense, is a sum of money owed to a creditor that is unlikely to be paid and for which the creditor is not willing to take action to collect for a variety of reasons, frequently due to the debtor not having the money to pay, for example due to a company going into liquidation or insolvency. Depending on accounting practices, regulatory considerations, and the institution provisioning, there are many technical definitions of what a bad debt is. Bank loans in the USA are referred to as "problem loans" if they are more than 90 days overdue. Accounting sources recommend deducting the entire amount of a bad debt from profit and loss or from a provision for bad debts as soon as it is anticipated.

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