Bad Debt Expense Understatement Due to Unwritten-Off Debt Steps:

• Calculate beginning allowance: 2% × $48,000 =$960.
• Adjust ending receivables for unwritten-off debt: $50,000 -$1,600 = $48,400.
• Calculate required ending allowance: 2% × $48,400 =$968.
• Allowance after hypothetical write-off: $960 -$1,600 = -$640; expense needed:$968 - (-$640) =$1,608. Why B is correct:
• Under the allowance method, bad debt expense equals write-offs plus net change in allowance ($1,600 + ($968 - $960)) =$1,608, which was not recorded, overstating profit by this full amount. Why the others are wrong:
• A: Incorrectly applies 2% to half the receivables change or similar miscalculation.
• C: Adds extraneous 2% to $50,000 ($1,000) plus $1,600 minus minor adjustment ($1,652), ignoring proper allowance mechanics.
• D: Doubles the expense or adds beginning allowance erroneously ($1,600 × 2 +$8).

Final answer: B