Question

During the year, Bears Inc. recorded credit sales of $620,000. Before adjustments at year-end, Bears has accounts receivable of $320,000, of which $55,000 is past due, and the allowance account had a credit balance of $2,600. Using the aging of receivables method, what would be the adjustment assuming Bears expects it will not collect 7% of the amount not yet past due and 22% of the amount past due?

Answer 1

Bad Debt Expense Dr. $28050

Allowance for Uncollectible accounts Cr. $28050

Step-by-step explanation:

given data

credit sales = $620,000

accounts receivable = $320,000

past due = $55,000

credit balance = $2,600

rate = 7 %

rate = 22 %

solution

so here Not yet past due is = $320,000 - $55,000 -

Not yet past due = $265,000

and

past due = $55,000

so Required provision is

Required provision = $265,000 × 7 % + $55,000 × 22 %

Required provision = $30650

and

Opening balance is $2,600

so

Required expense for year = $30650 - $2,600

Required expense for year = $28050

so here

correct entry is

Bad Debt Expense Dr. $28050

Allowance for Uncollectible accounts Cr. $28050