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The Allowance for Bad Debts has a credit balance of $ 8 comma 500$8,500 before the adjusting entry for bad debts expense. After analyzing the accounts in the accounts receivable subsidiary ledger using the agingminus−ofminus− receivables​ method, the​ company's management estimates that uncollectible accounts will be $ 15 comma 000$15,000. What will be the amount of Bad Debts Expense reported on the income​ statement?

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jepessoa

Answer:

$23,500

Explanation:

The aging of receivables method for determining bad debts is a method that classifies bad debt according to the length of time that they have not been collected.

When a company uses this method, any balance in the Allowance for Bad Debts account is made up of debt that the company has already considered 100% bad debt and determined it is uncollectible.

So to calculate the ending balance of the Allowance for Bad Debts account we have to add any balance in the account plus all the estimated bad debts that were not included previously.

Allowance for Bad Debts account = $8,500 + $15,000

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