Reference no: EM133007323

Potter Stables uses the aging method to estimate its bad debts. Sherman Potter, the company president, has given you the following aging of accounts receivable as of December 31, 2021, along with the historical probabilities that the account balances will not be collected. Actual accounts written off during the year were $27,000. The balance in the Allowance for Bad Debt Account at the beginning of the year was $30,000.

Account Age               Balance                            Probability of not collecting

Current                      $290,000                               2%

1-45 days past due       110,000                              5%

46-90 days past due       68,000                              8%

Over 90 days past due      40,000                           15%

Problem 1: What is the balance of the Allowance for Bad Debt Account at the end of the year after all adjustments?

A. $30,000

B. $27,000

C. $22,740

D. $19,740