Question

Corporation uses the allowance method to account for uncollectible receivables. At the beginning of the​ year, Allowance for Bad Debts had a credit balance of $1,000. During the year Beluga wrote off uncollectible receivables of $2,500. Beluga recorded Bad Debts Expense of $3,300. What is Beluga's ​year-end balance in Allowance for Bad​ Debts?

Answer 1

Answer:

Beluga's ​year-end balance in Allowance for Bad​ Debts is $1800

Explanation:

Given that the beginning of the​ year, Allowance for Bad Debts had a credit balance of $1,000. During the year, Beluga wrote off uncollectible receivables of $2,500. To do this, a debit would have been passed to Bad Debts Expense and a credit to receivable.

If the Bad Debts Expense amounted to $3,300 then the additional $800 ($3,300 - $2,500) would have been as a result of additional allowances for bad debt which would have been passed as a credit to Allowance for Bad​ Debts $800 and a debit to Bad Debts Expense $800.

This would make the total debits or balance in the Bad Debts Expense to $3,300 (2500 + 800) while the balance in the Allowance for Bad​ Debts would be $1800 made up of the opening balance of $1000 and the $800 posted during the year.