Calculate the amount of the bad debts expense

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Question - A company uses the aging of accounts receivable method to estimate its bad debts expense On December 31 of the current year an aging analysis of accounts receivable revealed the following:

Account Age

Balance

Estimated Uncollectible Percentage

Current (not yet due)

$155,000

0.5%

1-30 days past due

67,500

2.0%

30-60 days past due

36,250

8.0%

61-90 days past due

13,750

20.0%

90-120 days past due

8,000

50.0%

Over 120 days past due

4,500

70.0%

Total

$285,000

 

Required:

a. Calculate the amount of the Allowance for Doubtful Accounts that should be reported on the current year-end balance sheet.

b. Calculate the amount of the Bad Debts Expense that should be reported on the current year s income statement, assuming that the balance of the Allowance for Doubtful Accounts on January 1 of the current year was $20,500 and that accounts receivable written off during the current year totaled $21,600.

c. Prepare the adjusting entry to record bad debts expense on December 31 of the current year.

d. Show how Accounts Receivable will appear on the current year-end balance sheet as of December 31.

Reference no: EM131713891

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