Question

According to its Form 10-K, Macrosoft recorded bad debt expense of $100 and there were no bad debt recoveries during the current year. (Hint: Refer to the summary of the effects of accounting for bad debts on the Accounts Receivable (Gross) and the Allowance for Doubtful Accounts T-accounts. Use the T-accounts to solve for the missing values.) Required: 1. What amount of bad debts was written off during the current year?

Answer 1

Answer: This question is incomplete. There should be information on the opening balance and closing balance of allowance for bad debt. See below guidance to solve the question.

Explanation: Typically, account receivable is shown as net of allowance for bad debt. In the question above, there would be an opening balance (for preceding year) and closing balance (for current year) of the allowance for bad debt.

If the information above are present, the movement schedule will be: opening balance + bad debt expense - bad debt written off = closing balance.

To get the bad debt written off, you need to change the subject of the formula and rewrite the equation as: opening balance + bad debt expense - closing balance = bad debt written off. Substituting with those figures would give you the bad debts written off amount required.