Question

Credit sales during 2020 1,200,000 Accounts receivable deemed worthless and written off during 2020 27,000 As a result of a review and aging of accounts receivable in early January 2021, it has been determined that an allowance for doubtful accounts of $16,000 is needed at December 31, 2020. What amount should Murphy record as "bad debt expense" for the year ended December 31, 2020? $16,000 a.$13,000 b.$19,000 c.$40,000d.$16,000

Answer 1

Answer:

$41,000 (not given in the options)

Explanation:

When a company makes sales on account, debit accounts receivable and credit sales. Based on assessment, some or all of the receivables may be uncollectible.  

To account for this, debit bad debit expense and credit allowance for doubtful debt. Should the debt become uncollectible (i.e go bad), debit allowance for doubtful debt and credit accounts receivable.

The amount of bad debt to be recorded is the sum of the amount written off and the amount to be allowed as allowance for doubtful debt

= $27000 + $16000

= $41,000