To determine the bad debt expense Carl’s Collectibles will report for 2021, we can follow these steps:

1. Identify the estimated uncollectible amount needed after adjustment: The estimated losses for uncollectible accounts, based on the aging method, is $8,120. This is the desired ending balance for the Allowance for Uncollectible Accounts.

2. Calculate the existing balance in the Allowance for Uncollectible Accounts: The current balance in the Allowance for Uncollectible Accounts before adjustment is $1,625.

3. Calculate the adjustment needed: We need to adjust the allowance to reach the desired ending balance. The adjustment amount will be the difference between the desired ending balance ($8,120) and the current balance ($1,625).

$\text{Adjustment (Bad Debt Expense)} = 8,120 - 1,625 = 6,495$

4. Report Bad Debt Expense: The calculated adjustment of $6,495 is the bad debt expense that Carl’s Collectibles will report for 2021.

Answer:

The correct answer is: $6,495

Would you like a more detailed breakdown, or do you have any further questions?

Related Questions

1. How is the aging method different from the percentage of sales method for estimating bad debt expense?
2. What are some advantages of estimating uncollectible accounts using the aging method?
3. How does an adjustment for bad debt affect the financial statements?
4. What is the impact on net income if the bad debt expense is under- or overestimated?
5. How would the calculation change if the Allowance for Uncollectible Accounts had a debit balance?

Tip

When estimating bad debt, ensure the allowance account reflects the latest receivable aging analysis to maintain accurate financials.