In the balance sheet at the end of its first year of operations, Dinty Inc. reported an allowance for uncollectible accounts of $82,000. During the year, Dinty wrote off $32,000 of accounts receivable it had attempted to collect and failed. Credit sales for the year were $2,200,000, and cash collections from credit customers totaled $1,950,000.
What bad debt expense would Dinty report in its first-year income statement?
a. $50,000.
b. $82,000.
c. $114,000.
d. Can't be determined from the given information
c. $114,000.
Explanation: Bad debts expense - Write-offs = Change in Allowance balance.
So, Bad debts expense = Change in Allowance balance of $82,000 + Write-offs of $32,000 = $114,000.
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