Solution:
As per the information given in the question
Unadjusted allowance for doubtful accounts = $ 1,800
Bad debt expense = $ 7,000
As per the aging of accounts receivable method, the ending balance to be reported in the allowance for Doubtful Accounts has to be increased to cover the Actual bad debt expense.
Thus the ending balance in allowance for doubtful accounts shall be raised to the amount of bad debt expense = $ 7,000
The bad debt expense to be recorded is calculated as follows :
= Ending balance in allowance for doubtful accounts - Unadjusted allowance for doubtful accounts
= $ 7,000 - $ 1,800
= $ 5,200
Thus the amount of bad debt expense to be recorded for the year = $ 5,200
The solution is Option 3 : $ 5,200
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