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on december 31, 2024, a company had balances in accounts receivable and allowance for uncollectible accounts of $68,000 and $1,200, respectively. during 2025, the company wrote off $1,925 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $5,400 at december 31, 2025. bad debt expense for 2025 would be:



Answer :

Bad debt expense for 2025 would be $6,125.

  • When a debtor fails to fulfill their obligations to a company, a bad debt expense is incurred.

Bad debt expense for company would be calculated by = Allowance for Uncollectible Accounts - (Uncollectible Accounts Balance - Accounts Receivable Writeoff).

Bad debt expense = $5,400 - ($1,200 - $1925).

                              = $6125.

How are bad debt expenses incurred?

  • Company XYZ is not reimbursed for $100,000 worth of goods because Big Store stopped paying its debts.
  • Big Store has little faith in the company's ability to repay $100,000, so the company considers it a bad debt.

Are bad debt expenses a liability or an expense?

  • Bad debts constitute an expense rather than a liability to the firm since the amount that was anticipated to be paid by the debtor is not recoupable.

How is bad debt expense reported on the balance sheet?

  • Provisions for doubtful debts are shown in balance sheets immediately below accounts receivable and should always carry a credit balance since they are counter accounts to accounts receivable.

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