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Sagot :
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.
To Learn more about Bad debt expense:
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