Question

At year-end, Chief Company has a balance of $10,000 in accounts receivable of which $1,000 is more than 30 days overdue. Chief has a credit balance of $100 in the allowance for doubtful accounts before any year-end adjustments. Using the aging of accounts receivable method, Chief estimates that 1% of current accounts and 10% of accounts over thirty days are uncollectible. What is the amount of bad debt expense

Answer 1

$90

Step-by-step explanation:

Total accounts receivable = $10,000

Overdue accounts (30 days) = $1,000

Current account = Total accounts receivable - Overdue accounts (30 days) = $10,000 - $1,000 = $9,000

Bad debt expense = Accounts receivable x Percentage estimated as uncollectible - Existing credit balance in accounts receivable

Bad debt expense = ($9,000 * 1%) + ($1,000 * 10%) - $100

Bad debt expense = $90 + $100 - $100

Bad debt expense = $90