Question 1 The following information is available for Marigold Corp Allowance fo

ID: 2574058 • Letter: Q

Question

Question 1 The following information is available for Marigold Corp Allowance for doubtful accounts at December 31, 2016 Credit sales during 2017 Accounts receivable deemed worthless and written off during $25900 1120000 25100 2017 As a result of a review and aging of accounts receivable in early January 2018, it has been determined that an allowance for doubtful accounts of $15100 is needed at December 31, 2017. What amount should Marigold record as "bad debt expense" for the year ended December 31, 2017? O $14300 O $15100 $15900 41000

Explanation / Answer

Solution:

Under Allowance for Doubtful Account method, the company uses an estimate for allowance for doubtful debt by using specified method and accordingly book Bad Debt Expenses for the period.

Allowance method creates bad debts expenses before the company knows specifically which customers will not pay on the basis of prior history and prior experience.

Now, we will first identify the accounts that will be used in this question and the amount.

As determined by the company the allowance for doubtful account at Dec 31, 2017 needed = $15,100

We need to prepare the T-account for Allowance for Doubtful Account at Dec.31, 2017 to find out Bad Debt Expense

Allowance for Doubtful Account

Debit

Credit

Accounts Receivable Written off during 2017

$25,100

$25,900

Beg. Balance (Dec.31, 2016

Ending Balance Dec.31, 2017

(as determined by the company)

$15,100

$14,300

Bad Debt Expense for the year 2017 (Balancing Figure)

$40,200

Hence, the Bad Debt Expense for the Year Ended Dec 31, 2017 should be $14,300

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