Question

      In the balance sheet at the end of its first year of operations, ABC Inc. reported an allowance for doubtful accounts of $80,500. During that year, ABC wrote off $33,000 of accounts receivable it had attempted to collect and failed. Credit sales for the year were $2,260,000, and cash collections from credit customers totaled $1,900,000. What bad debt expense would ABC report in its first year income statement?

            A) $80,500         B) $47,500            C) $113,500 D) None of the above

Please explain and or show work.

Answer 1

	Amount $
Allowance for doubtful accounts year end Balance	80,500
Add: Written Off Accounts receivable	33,000
Bad Debt Expense for First Year	113,500
Correct answer is option C .

Explanation:

We have ending balance of $ 80,500 in allowance which is after written off of $ 33,000 so in order to arrive a bad debt expense of first year we have to add the both amount & that will be equal to bad debt expense which have debited while creating allowance for doubtful accounts.