Question

On 1/1/2020, Studebaker Corp. had an Accounts Receivable balance of $500,000 and an Allowance for Doubtful Accounts balance of $30,000. During 2020, Studebaker made credit sales of $4,000,000 and cash collections of $4,100,000. Also during 2020, Studebaker wrote off uncollectible accounts receivable totaling $28,000. Based on an aging schedule, uncollectible amounts are estimated to total $35,000 as of 12/31/2020. Studebaker uses the Aging Schedule approach to recording bad debt expense. The adjusting journal entry to record Bad Debt Expense for 2020 includes a debit to Bad Debt Expense of

Answer 1

Answer:

Bad Debt expense $28,000.

Explanation:

Bad debts are the noncollectable amount of receivables which are not recovered. Companies usually maintain an allowance for uncollected receivables as doubtful debts or bad debts. The expense is recorded when there is no hope left for collection of these debts. Studebaker has estimated its bad debts to be 38,000 but it wrote off $28,000 which is the actual expense.