By how many varsity should debit bad debt expense

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Question - Varsity Cleaners Inc. has historically used the direct write-off method to account for bad debt. In fact, in the past three years, Varsity has written off $34,000 of uncollectible accounts. Varsity recently hired a graduate of Parnell University who suggested that Varsity should switch to the allowance method of accounting for bad debt as it provides a better representation of matching costs to revenues.

The graduate presents Varsity with a cost comparison and illustrates that had Varsity been using the allowance method, their bad debt in the commensurate 3 years would have been $46,000.

In the entry to switch to the allowance method, Varsity should debit bad debt expense by how many dollars?

Reference no: EM132965987

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