Question

Rankine Company estimates its bad debts expense by aging its accounts receivable and applying percentages to various age groups of the accounts. Rankine calculated a total of $9,600 in possible credit losses as of December 31. Accounts Receivable has a balance of $307,200, and the Allowance for Doubtful Accounts has a credit balance of $1,200 before adjustment at December 31

Required:
What is the net amount of accounts receivable that should be included in current assets?

Answer 1

Date Account titles and Explanation Debit Credit

Bad Debt Expense $8,400

Allowance for doubtful account $8,400

($9,600 credit required - $1,200 already existing)

(To record bad debt expenses)

Particulars Amount

Account receivables $307,200

Less: Allowance for doubtful account $9,600

Net amount of accounts receivable $297,600