Calculate the desired ending balance of the allowance

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Reference no: EM133328393

Case: Costco's Auto Part uses the aging method to estimate bad debt expense. At the end of 2022, the company had an accounts receivable balance of $76,500 and a pre-adjustment debit balance in the allowance for doubtful accounts of $2,380. The company had the following analysis of accounts receivable at the end of 2022:

Accounts Receivable Age	Amount Proportion	Expected to Default
Current	$40,000	2%
1-15 days past due	11,500	3%
16-45 days past due	3,100	7%
46-90 days past due	4,600	15%
Over 90 days past due	17,300	25%
	$76,500

Costco's Auto Parts has a December 31 year end.

Required:

Calculate the desired ending balance of the allowance for doubtful accounts at the end of 2022.
Prepare the journal entry to record bad debt expense at year end.
Assume that a receivable of $1,550 is written off on January 15, 2023, give the journal entry to record the write-off by Costco's auto Part.

Reference no: EM133328393

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