A8-2 (Algo) Interpreting Disclosure of Allowance for Doubtful Accounts [LO 8-2]

Agarwal Expeditions, disclosed the following rounded amounts (in millions) concerning the Allowance for Doubtful Accounts on its Form 10-K annual report.

Allowance for Doubtful Accounts
(dollars in millions)
Year	Beginning Balance	Increases for Bad Debt Expense	Decreases for Write-Offs	Ending Balance
2018	$ 43	$ 31	$ ?	$ 46
2017	37	32	26	43
2016	39	21	23	37

Required:

1-a. Prepare a T-account for the Allowance for Doubtful Accounts and enter into it the 2016 amounts from the above schedule. The balance at the beginning of each year in the Allowance for Doubtful Accounts is a credit balance.

1-b. Write the T-account in equation format to prove the above items account for the changes in the account.

2. Record summary journal entries for 2017 related to (a) estimating Bad Debt Expense and (b) writing off specific customer account balances.

3. Supply the missing information for 2018.

4. If Agarwal Expeditions had written off an additional $32 of Accounts Receivable during 2018, by how much would Net Receivables have decreased? How much would Net Income have decreased?