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?

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Business

Abigayle Hampton

2 September, 08:40

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?

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Mini Me · Answer 1

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.