December 31, 20X1, Naval, Inc. reported sales of $800,000, bad debt expense of $30,000, accounts receivable of $300,000, and an allowance for doubtful accounts (credit balance) of $10,000.

In 20X2, Naval, Inc. made another $900,000 in sales on credit but collected only $600,000 in cash from those accounts.

During the year, one customer who owed $11,000 declared bankruptcy and that account was written off as uncollectible.

At the end of 20X2, the companys accountants believed that 3% of ending receivables will eventually prove to be uncollectible.

How much should be reported as bad debt expense?

HINT: 3% of the ending balance of AR = the desired ending balance in the Allowance account.

$11,000

$12,740

$17,670

$18,000

$18,670

$20,760