Carl’s Collectibles estimates its uncollectible accounts by aging its accounts receivable and applying percentages to various aged categories of accounts. Carl’s computes a total of $8,120 in estimated losses as of December 31, 2021. Its Accounts Receivable account has a balance of $250,000 and its Allowance for Uncollectible Accounts has a balance of $1,625 before adjustment at December 31, 2021.

How much bad debt expense will Carl’s Collectibles report in 2021?

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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.

Carl’s Collectibles estimates its uncollectible accounts by aging its accounts receivable and applying percentages to various aged categories of accounts. Carl’s computes a total of $8,120 in estimated losses as of December 31, 2021. Its Accounts Receivable account has a balance of $250,000 and its Allowance for Uncollectible Accounts has a balance of $1,625 before adjustment at December 31, 2021.

How much bad debt expense will Carl’s Collectibles report in 2021?

Discover how to determine the bad debt expense for Carl’s Collectibles in 2021 using the aging method of accounts receivable. This problem demonstrates financial math concepts, including the calculation of bad debt expense and allowance for uncollectible accounts. Learn the steps required to compute a $6,495 adjustment with a focus on accurate financial reporting.

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