Red skies equipment company uses the aging approach to

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Red Skies Equipment Company uses the aging approach to estimate bad debt expense at the end of each accounting year. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $48,000 (2) up to one year past due, $3,000 and (3) more than one year past due, $800. Experience has shown that for each age group, the average loss rate on the amount of the receivable at year-end due to uncollectability is (1) 2 percent, (2) 7 percent, and (3) 30 percent, respectively.

At December 31, 2013 (end of the current accounting year), the Allowance for doubtful account balance was $920 (credit).

  1. Determine the amount of bad debt expense that should be reported on the income statement
  2. Determine the amount of net accounts receivable that should be reported on the balance sheet at year-end

Reference no: EM13575786

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