Question

The 2013 annual report of Oracle Corporation included the following information relating to their allowance for doubtful accounts: Balance in allowance at the beginning of the year $323 million, accounts written off during the year of $145 million, balance in allowance at the end of the year $296 million. What did Oracle Corporation report as bad debt expense for the year?
(A) $27 million
(B) $178 million
(C) $118 million
(D) $151 million
(E) None of the above

Answer 1

Answer:

Oracle Corporation report as bad debt expense for the year: $118 million

Explanation:

allowance at the end of the year - allowance at the beginning of the year + accounts written off during the year = bad debt expense for the year

$296 million - $323 million + $145 million = $118 million

The accounts written off during the year increase the expense because they are uncollectible so there were removed from a receivable account in the general ledger. The way to do so is:

A credit to Accounts Receivable, and a debit to Allowance for Doubtful Accounts