Question

On December 31, 2021, Larry's Used Cars had balances in Accounts Receivable and Allowance for Uncollectible Accounts of $66,000 and $900, respectively. During 2022, Larry's wrote off $2,275 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $5,500 at December 31, 2022. Bad debt expense for 2022 would be:

Answer 1

Answer:Bad debts expense =  $6,875

Explanation:

A bad debt expense is recognized when a customer cannot pay its financial obligations therefore the  account  receivable will no longer be collectible

Beginning uncollectible accounts= $900

Ending allowance for uncollectible accounts = $5,500

Amounts written off = $2,275

Ending allowance for uncollectible accounts =Begining uncollectible accounts + current bad debts expense - amounts written off in 2022

$5,500= $900 + bad debts expense - $2,275

current bad debts expense for 2022= $5,500 - $900 + $2,275 = $6,875

Can also be illustrated as  

ACCOUNTS

Begining uncollectible accounts                              $900

Amounts written off (less)                                       - $2,275

Bad debts expense(add)                                         + $6,875

Ending allowance for uncollectible accounts          $5,500