Question

As of December 31, 2016, Amy Jo's Appliances had unadjusted account balances in accounts receivable of $313,000 and $870 in the allowance for uncollectible accounts, following 2016 write-offs of $6,380 in bad debts. An analysis of Amy Jo's December 31, 2016, accounts receivable suggests that the allowance for uncollectible accounts should be 3% of accounts receivable. Bad debt expense for 2016 should be: Multiple Choice a. $6,380. b. $9,390. c. $8,520. d. None of these answer choices are correct.

Answer 1

Answer:

Bad debt expense for 2016 should be: c. $8,520

Explanation:

As of December 31, 2016, Amy Jo's Appliances had  accounts receivable of $313,000 and the allowance for uncollectible accounts should be 3% of accounts receivable

Bad debts are estimated: 3% x $313,000 = $9,390

Amy Jo's Appliances had $870 in the allowance for uncollectible accounts

Bad debts expense = $9,390 - $870 = $8,520

The entry will be made:

Debit Bad debts expense $8,520

Credit Allowance for uncollectible accounts $8,520