The Stormy Company has provided the following information: • Accounts receivable

Question

The Stormy Company has provided the following information:

• Accounts receivable written-off as uncollectible during the year amounted to $10,000.
• The accounts receivable balance at the beginning of the year was $100,000.
• The accounts receivable balance at the end of the year was $120,000.
• The allowance for doubtful accounts balance at the beginning of the year was $2,000.
• The allowance for doubtful accounts balance at the end of the year after the recording of bad debt expense was $5,000.
• Credit sales during the year totaled $450,000.

How much was Stormy Company's bad debt expense?

$5,000

$13,000

$10,000

$2,000

$5,000

$13,000

$10,000

$2,000

Explanation / Answer

Solution:

Option B is correct.

Bad debt expense = Ending allowance for doubtful accounts – Beginning allowance for doubtful accounts + Accounts receivable write-offs

Bade debt expense = $5,000 - $2,000 + $10,000

Bad debt expense = $13,000

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