A company had credit sales of $500,000 during the quarter ended 9/30/2013. It had to write-off $300 of accounts as uncollectible during the quarter, and had no recoveries. Its balance in Allowance for Doubtful Accounts was $2,000 at 6/30/2013. Based on an aging of its accounts receivable, it expects that $2,700 of its outstanding A/R as of 9/30/2013 will ultimately be uncollectible in the future. How much Bad Debt Expense should the company report for the quarter ended 9/30/2013?
We have enough information to calculate Bad Debt Expense using the aging method. The ending balance in Allowance for Doubtful Accounts (ADA) will be $2,700. In the ADA T-account, we have Beginning Balance + Bad Debt Expense – Write-offs = Ending Balance. Filling in what we know: $2,000 + Bad Debt Expense – $300 = $2,700. So, Bad Debt Expense = $2,700 + $300 – $2,000 = $1,000.
