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At the beginning of​ 2025, Gourmet​ Cupcakes, Inc. has the following ledger​ balances:

Accounts Receivable minus $ 45 comma 000​(Debit)
Allowance for Bad Debts minus $ 7 comma 000​(Credit)
During the​ year, credit sales amounted to $ 810 comma 000. Cash collected on credit sales amounted to $ 770 comma 000 and $ 17 comma 000 has been written off. Gourmet Cupcakes uses the agingminusofminusreceivables method to record bad debts expense. The estimate of uncollectible accounts was $ 27 comma 000. The ending balance in the Allowance for Bad Debts account is​ ________.

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To find the ending balance in the Allowance for Bad Debts account, we can break down the process into steps based on the provided information. We start with the beginning balance and account for the write-offs and the estimated uncollectible accounts.

  1. Beginning balance of Allowance for Bad Debts: \( 7,000 \) (Credit)
  2. Write-offs during the year: \( 17,000 \) (Debit)
  3. Estimated uncollectible accounts: \( 27,000 \) (This will be the ending balance we need to adjust the allowance account for)

Calculation Steps:

  1. Adjust for the write-off:

    • We reduce the Allowance for Bad Debts by the amount written off: \[ \text{Adjusted Allowance} = \text{Beginning Balance} - \text{Write-offs} \] \[ \text{Adjusted Allowance} = 7,000 - 17,000 = -10,000 \] (Note: This means we have a negative balance, indicating that the allowance has been depleted.)

  2. Determine the required balance:

    • The company estimates that \( 27,000 \) of Accounts Receivable will be uncollectible. This means we need the Allowance for Bad Debts to have a final balance of \( 27,000 \).

  3. Calculate the Bad Debt Expense:

    • Since the Allowance account is currently at \(-10,000\) and needs to reach \( 27,000\), we must add enough to account for this change: \[ \text{Bad Debt Expense} = \text{Required Balance} - \text{Adjusted Balance} \] \[ \text{Bad Debt Expense} = 27,000 - (-10,000) = 27,000 + 10,000 = 37,000 \]

  4. Final Ending Balance in Allowance for Bad Debts:

    • After recording the necessary Bad Debt Expense, the provision for Bad Debts and ending balance will be: \[ \text{Ending Balance} = 27,000 (this is based on the aging method estimation) \]

Thus, the ending balance in the Allowance for Bad Debts account is $27,000.