Question

The Astroids Company records show the following aging of accounts receivable:

Days 0‑30 31‑60 61‑90 Over 90
Amount $2,000 $1,000 $ 500 $ 100
% Estimated
Uncollectible 5% 20% 30% 50%
If the balance in the Allowance For Doubtful Accounts is a credit of $50 before adjustment, the Bad Debt Expense for the period is:
a. $ 450
b. $ 500
c. $ 550
d. $1400

Answer 1

To calculate the Bad Debt Expense for Astroids Company, multiply each accounts receivable aging category by its respective percentage and sum them up. After accounting for the existing allowance, the Bad Debt Expense is determined to be a. $450.

Step-by-step explanation:

To determine the Bad Debt Expense for Astroids Company, we need to apply the given percentages of estimated uncollectible amounts for each aging category to the respective accounts receivable balances. Then, adjust for the existing credit balance in the Allowance for Doubtful Accounts.

Here is the calculation:

• $2,000 at 5% = $100
• $1,000 at 20% = $200
• $500 at 30% = $150
• $100 at 50% = $50

Adding these together: $100 + $200 + $150 + $50 = $500.

Since there is already a $50 credit in the Allowance for Doubtful Accounts, we need to adjust the total required allowance to:

$500 (required allowance) - $50 (existing credit) = $450.

Therefore, the correct Bad Debt Expense for the period is $450.