A company used the aging of accounts receivable method. at december 31, management determined that the net realizable value of accounts receivable was $304,000. the balance in accounts receivable was $384,000 and the unadjusted credit balance in allowance for doubtful accounts was $16,000. what was the amount of bad debt expense for the year?

Problem

What was the amount of bad debt expense for the year?

Facts

Net realizable value of account $304,000

Receivable account $384,000

Doubtful Account $16,000

Mathematical Operation

Addition and Subtraction

Solution

Subtract the allowance of doubtful accounts from the base receivable account.

The answer should be the net realizable account. But since there is a given amount of the allowance of doubtful accounts and net realizable value account, it should get the net value account as an answer. This means that the missing amount would fall on the bad expenses.

$384,000 - ($1600 + N (Bad debt Expense)) = $304,000

To get the amount of bad expenses, add the net realizable account to the given allowance for doubtful accounts. Then subtract it from the receivable account.

Amount of bad expenses = $384,000 - ($1600 + $304,000)

= $384,000 - $305600

= $ 78,400 Answer