Buddy 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 $ 800. During the year Buddy wrote off uncollectible receivables of $ 1, 700. Buddy recorded Bad Debts Expense of $ 3, 400. What is Buddy's year-end balance in Allowance for Bad Debts?

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Business

Kenzie Gray

9 February, 07:55

Buddy 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 $ 800. During the year Buddy wrote off uncollectible receivables of $ 1, 700. Buddy recorded Bad Debts Expense of $ 3, 400. What is Buddy's year-end balance in Allowance for Bad Debts?

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Lane Collier · Answer 1

Buddy's year-end balance in Allowance for Bad Debts is $2,500.

Explanation:

Allowance for Bad Debts is a contra-asset account. The amount of receivables expected to be uncollectible is recorded here.

When the year starts, this account can have balance, so we have to add $800 for the resolution of this case.

The registration of a write off means that the expense is not going to be collected, so we have to subtract $1,700.

During the year, $3,400 was recorded in the account. So we have to add that amount to the example.

In conclusion, this is our balance $800-$1,700+$3,400=$2,500.