Question

Crimson Inc. recorded credit sales of $779,000, of which $590,000 is not yet due, $110,000 is past due for up to 180 days, and $79,000 is past due for more than 180 days. Under the aging of receivables method, Crimson Inc. expects it will not collect 3% of the amount not yet due, 14% of the amount past due for up to 180 days, and 21% of the amount past due for more than 180 days. The allowance account had a debit balance of $3,500 before adjustment. After adjusting for bad debt expense, what is the ending balance of the allowance account

Answer 1

$49,690 credit balance

Step-by-step explanation:

total credit sales = $590,000

past due up to 180 days = $110,000

past due for more than 180 days = $79,000

Crimson expects to not collect:

• 3% of credit sales not due yet = $590,000 x 3% = $17,700
• 14% of credit sales past due up to 180 days = $110,000 x 14% = $15,400
• 21% of credit sales past due for more than 180 days = $79,000 x 21% = $16,590
• total = $49,690

Allowance for uncollectible amounts has $3,500 debit balance

the adjusting entry should be:

Dr Bad debt expense 53,190

Cr Allowance for uncollectible accounts 53,190

The ending balance = $53,190 - $3,500 = $49,690