Question

Domino Company uses the aging of accounts receivable method to estimate uncollectible accounts expense. Domino began Year 2 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $43,050 and $3,350, respectively. During the year, the company wrote off $2,570 in uncollectible accounts. In preparation for the company's Year 2 estimate, Domino prepared the following aging schedule: Number of days Receivables % Likely to be past due amount uncollectible Current $ 67,000 1% 0-30 26,000 5% 31-60 6,460 10% 61-90 3,220 25% Over 90 2,900 50% Total $ 105,580 What will Domino record as Uncollectible Accounts Expense for Year 2?

Answer 1

Bad debts expense for the year $ 4,091

Step-by-step explanation:

Computation of allowance for uncollectible accounts

Ageing Days Balance % Uncollectible Uncollectible

$ amount $

Current 67,000 1 % 670

0 - 30 days 26,000 5 % 1,300

31 - 60 days 6,460 10 % 646

61 - 90 days 3,220 25 % 805

Over 90 days 2,900 50 % 1,450

Totals 105,580 4,871

Computation of bad debts expense for the year

Opening balance allowance for uncollectible accounts 3.350

Less: Accounts written off during the year 2,570

Pre adjusted balance allowance for uncollectible accounts 780

Bad debts expense for the year =

(required balance - pre adjusted balance = $ 4,871 - $ 780 $ 4,091