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On January 1,20XX, Drake Company had a $100,000 balance in Accounts Receivable and a $5,000...

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Accounting

On January 1,20XX, Drake Company had a $100,000 balance in Accounts Receivable and a $5,000 balance in the Allowance for Doubtful Accounts. During the year ended December 31,20XX, Drake Company: (1) sold $500,000 of merchandise on account; (2) collected $200,000 cash from account receivables; (3) wrote-off accounts receivable balances from two customers totaling $3,000 after all collection efforts had been exhausted; and (4) recorded bad debt expense and increased the allowance for doubtful accounts in the amount needed to have a $10,000 balance in the allowance for doubtful accounts as of December 31,20XX. Drake Company management made the estimate that its allowance for doubtful accounts should be $10,000 as of December 31,20XX based on its review of its aged accounts receivable schedule as of December 31,20XX.
The balance in Drake's accounts receivable as of December 31,20XX before reduction for the allowance for doubtful accounts; and the amount of Drake's bad debt expense recorded in its income statement for the year ended December 31,20XX are:
Group of answer choices
$397,000 and $10,000
$400,000 and $10,000
$297,000 and $3,000
$397,000 and $8,000

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