The amount of uncollectible accounts at the end of the year is estimated to be $25,000 using the aging of accounts receivable method. The balance in the Allowance of Doubtful Accounts account is an $8,000 credit before adjustment. Assuming no accounts are written off during the period, what will be the amount of bad debts expense for the period? A. $8,000. B. $17,000. C. $25,000 D. $33,000.
Related questions
From the inception of operations to December 31, 2020, Metlock Corporation provided for uncollectible accounts receivable under the allowance method. The provisions are recorded, based on analyses of customers with different risk characteristics. Bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account, and no year-end adjustments to the allowance account were made. Metlock’s usual credit terms are net 30 days.
The balance in Allowance for Doubtful Accounts was $114,400 (Cr.) on January 1, 2020. In 2020, credit sales totaled $7,920,000, the provision for doubtful accounts was determined to be $158,400, $79,200 of bad debts were written off, and recoveries of accounts previously written off amounted to $13,200. Metlock installed a computer system in November 2020, and the aging of accounts receivable was prepared for the first time as of December 31, 2020. A summary of the aging is as follows.
| Classification by Month of Sale | Balance in Each Category | Estimated % Uncollectible |
| November - December 2020 | $950,400 | 2% |
| July - October | $572,000 | 10% |
| January - June | $369,600 | 25% |
| Prior to 1/1/20 | $132,000 | 80% |
| $2,024,000 |
Based on the review of the collectibility of the account balances in the “prior to 1/1/20” aging category, additional receivables totaling $52,800 were written off as of December 31, 2020. The 80% uncollectible estimate applies to the remaining $79,200 in the category. Effective with the year ended December 31, 2020, Metlock adopted a different method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable.
Prepare a schedule analyzing the changes in Allowance for Doubtful Accounts for the year ended December 31, 2020. Show supporting computations in good form. (Hint: In computing the 12/31/20 allowance, subtract the $52,800 write-off.)
