To calculate the Bad Debt Expense for the third quarter of 2013, we need to follow these steps:
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Estimate uncollectible accounts: The company estimates that 1% of its credit sales will ultimately be uncollectible. With credit sales of $500,000, the estimated uncollectible amount would be: \[ \text{Estimated uncollectible} = \text{Credit Sales} \times \text{Percentage} = 500,000 \times 0.01 = 5,000 \]
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Determine the necessary adjustment to the Allowance for Doubtful Accounts: We need to account for the beginning balance of the Allowance for Doubtful Accounts, any write-offs during the quarter, and the required ending balance after recognizing the Bad Debt Expense.
- Beginning balance: $2,000
- Write-offs during the quarter: $300
- Required ending balance (from calculation above): $5,000
To find the Bad Debt Expense, use the formula: \[ \text{Bad Debt Expense} = \text{Required Ending Balance} - \text{Beginning Balance} + \text{Write-offs} \]
Plugging in the values: \[ \text{Bad Debt Expense} = 5,000 - 2,000 + 300 = 3,300 \]
Thus, the company should report a Bad Debt Expense of $3,300 for the third quarter of 2013.
Based on your provided answer options, it seems that $5,000 is the closest to the correct calculation of the estimated uncollectible accounts, but it's important to clarify that Bad Debt Expense is actually $3,300 based on the full calculation. Since that option is not available, there may be some misunderstanding or miscalculation in the options provided.
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