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Wheeling Inc. uses the aging of accounts receivable method. Its estimate of uncollectible receivables resulting from the aging analysis equals $6,900. At the end of the year, the balance of Accounts Receivable is $119,000 and the unadjusted debit balance of the Allowance for Doubtful Accounts is $880. Credit sales during the year totaled $188,000. What is the estimated Bad Debt Expense for the current year?

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Answer:

The estimated Bad Debt Expense for the current year is $7,780.

Explanation:

To journalize the credit sales during the year:

Debit Accounts receivable $188,000

Credit Sales revenue $188,000

(To recognize sales revenue)

The above journals bring the accounts receivable to: $119,000 + $188,000 = $307,000

Since the Allowance for Doubtful Accounts  has a debit balance of $880, bad debt expense will be $6,900 + $880 = $7,780. The addition is necessary in order to reinstate the allowance account to $6,900.

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