Question

Domino company ages its accounts receivable to estimate bad debts expense. Domino began year 2 with balances in accounts receivable and allowance for doubtful accounts of $45,350 and $3560, respectively. During year 2, the company wrote off $2690 in uncollectible accounts. In preparation for the company's estimate of bad debts expense for year 2, Domino prepared the following aging schedule:

Number of days past due Receivables amount % likely to be uncollectible
Current $74,000 1%
0-30 $27,700 5%
31-60 $7160 10%
61-90 $3720 25%
Over 90 $3400 50%
Total $115,980

What amount will be reported as bad debts expense on the year 2 income statement?
1) $5471
2) $1911
3) $4601
4) $2690
5) None of the above

Answer 1

The correct answer is $5,471 (option 1). bad debts expense on the year 2 income statement is $5,471. bad debts expense on the year 2 income statement can be calculated by multiplying the accounts receivable in each aging category by the corresponding percentage likely to be uncollectible, and then summing up these amounts.

Step-by-step explanation:

The bad debts expense on the year 2 income statement can be calculated by multiplying the accounts receivable in each aging category by the corresponding percentage likely to be uncollectible, and then summing up these amounts. The calculation would look like this: Current: $74,000 * 1% = $740, 0-30 days past due: $27,700 * 5% = $1,385, 31-60 days past due: $7,160 * 10% = $716, 61-90 days past due: $3,720 * 25% = $930, Over 90 days past due: $3,400 * 50% = $1,700, Adding up these amounts gives us a total bad debts expense of $5,471. Therefore, the correct answer is $5,471 (option 1).

The correct answer is $5,471 (option 1). bad debts expense on the year 2 income statement is $5,471. bad debts expense on the year 2 income statement The bad debts expense on the year 2 income statement can be calculated by multiplying the accounts receivable in each aging category by the corresponding percentage can be calculated by multiplying the accounts receivable in each aging category by the corresponding percentage likely to be uncollectible, and then summing up these amounts.