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The following information is available for Murphy Company:    Allowance for doubtful accounts at December 31,...

The following information is available for Murphy Company:
   Allowance for doubtful accounts at December 31, 2016    $27,000
   Credit sales during 2017    1,200,000

   Accounts receivable deemed worthless and written off during 2017 24,000

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 $26,000 is needed at December 31, 2017. What amount should Murphy record as "bad debt expense" for the year ended December 31, 2017?

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Answer #1
The Allowance for Doubtful Accounts is at Cr balance at the BEGINNING of the year at an amount of $27000
Write offs is a Debit to the All for D.A. for $ 24000
Therefore BEFORE the provision, the account has a CR bal of $3,000
The company wants to record $26000 of the All for D.A.
Since it has a credit of 3,000 we need an amount to have an allowance of 26000, so we do the entry: Bad debt expense 23000 (DR) Allowance for doubtful accounts (23000).
Answer: 23000
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