Mill Co.’s allowance for uncollectible accounts was $100,000 at the end of year 2 and $90,000 at the end of year 1. For the year ended December 31, year 2 Mill reported bad debt expense of $16,000 in its income statement. What amount did Mill debit to the appropriate account in year 2 to write off actual bad debts?

 Mill Co.’s allowance for uncollectible accounts was $100,000 at the end of year 2 and $90,000 at the end of year 1. For the year ended December 31, year 2 Mill reported bad debt expense of $16,000 in its income statement. What amount did Mill debit to the appropriate account in year 2 to write off actual bad debts?
$ 6,000 Correct
$10,000
$16,000
$26,000
 You Answered Correctly!
This answer is correct. The solutions approach is to set up a T-account for the allowance for doubtful accounts.



The image shows a table for “Allowance for Doubtful Accounts,” where year 2 write-offs are 6,000, balance on December 31, year 1 is 90,000, DA expense recorded in income statement is 16,000, and balance on December 31, year 2 is 100,000.

During year 2, bad debt expense of $16,000 was recorded as a credit to the allowance account.  The write-off of actual bad debts may be calculated by plugging for the number that gives an ending allowance account balance of $100,000. Therefore, the debit entry is $6,000 ($90,000 + $16,000 − $100,000).