Answer:
(D) $5,300
Explanation:
During the year, credit sales were $800,000 => Accounts Receivable increased $800,000
Customers' accounts collected were $810,000=> Accounts Receivable decreased $810,000
The company wrote off $4,000 in worthless accounts => Accounts Receivable decreased $4,000 and the Allowance for Doubtful Accounts decreased $4,000
At the end of the year, before adjusting, the balance of
Accounts Receivable = $140,000+$800,000-$810,000-$4,000 = $126,000
Allowance for Doubtful Accounts = $5,000-$4,000 = $1,000
Bad Debts were estimated: 5% x $126,000 = $6,300
Bad Debts Expense should be provided: $6,300-$1,000 = $5,300
