Question

On December 31, 2021, Larry's Used Cars had balances in Accounts Receivable and Allowance for Uncollectible Accounts of $64,000 and $1,250, respectively. During 2022, Larry's wrote off $2,600 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $5,150 at December 31, 2022. Bad debt expense for 2022 would be:

Answer 1

Answer:

Bad debt expense                        6,500 debit

    Allowance for uncollectible account 6,500 credit

Explanation:

"determined that there should be an allowance for uncollectible accounts of $5,150 at December 31, 2022."

We need to recognize as much bad debt as it need to leave the allowance balance on our expected uncollectible account.

balance for allowance before adjsutment:

beginning - write-off = unadjusted allowance

1,250 - 2,600 = -1,350

expected balance - unadjusted balance = adjustment

                5,150      - (-1,350)                     =  6,500

Bad debt expense                        6,500 debit

    Allowance for uncollectible account 6,500 credit