Question

Crimson Inc. recorded credit sales of $684,000, of which $520,000 is not yet due, $110,000 is past due for up to 180 days, and $54,000 is past due for more than 180 days. Under the aging of receivables method, Crimson Inc. expects it will not collect 5% of the amount not yet due, 14% of the amount past due for up to 180 days, and 23% of the amount past due for more than 180 days. The allowance account had a debit balance of $2,800 before adjustment. After adjusting for bad debt expense, what is the ending balance of the allowance account

Answer 1

$53,820

Step-by-step explanation:

Calculation to determine the ending balance of the allowance account

Ending balance of allowance account=($520,000 x 5%) + ($110,000 x 14%) + ($684,000-$520,000- $110,000x 23%)

Ending balance of allowance account=$26,000+$15,400+(54,000*23%)

Ending balance of allowance account=$26,000+$15,400+$12,420

Ending balance of allowance account=$53,820

Therefore the ending balance of the allowance account is $53,820