Question

Fraud Investigators Incorporated operates a fraud detection service. On March 31, 10 customers were billed for detection services totaling $25,000. On October 31, a customer balance of $1,500 from a prior year was determined to be uncollectible and was written off. On December 15, a customer paid an old balance of $900, which had been written off in a prior year. On December 31, $500 of bad debts were estimated and recorded for the year.

a) $23,100
b) $23,500
c) $24,100
d) $25,100

Answer 1

To find the closing receivables balance for Fraud Investigators Incorporated, one must consider the initial billing, any amounts written off, recovered payments, and estimated bad debts. The correct balance is $24,400 after these adjustments, which is not reflected in the provided options.

Step-by-step explanation:

The student has asked about calculating the receivables for Fraud Investigators Incorporated after various transactions involving billing, writing off uncollectible accounts, and receiving payment on previously written-off accounts. To determine the correct balance, we analyze each event:

• On March 31, the company bills customers a total of $25,000 for services.
• On October 31, a previously recognized account balance of $1,500 was deemed uncollectible and written off.
• On December 15, a payment of $900 is received for an old balance that was previously written off.
• On December 31, an additional $500 of bad debt expense is estimated and recorded for the year.

Calculating the ending receivables, we start with the initially billed $25,000, subtract the written-off $1,500, add back the recovered $900, and do not adjust for the estimated bad debt of $500 since it is not a specific customer balance but an estimation for the accounting period. Therefore, the closing receivables balance is $25,000 - $1,500 + $900 = $24,400. None of the provided options (a), (b), (c), or (d) reflects this correct answer; there may be a typo within the question or options given.