Question

The following information pertains to Lightning Inc., at the end of December: Credit Sales $ 20,000 Accounts Payable 10,000 Accounts Receivable 10,400 Allowance for Uncollectible Accounts 400 credit Cash Sales 20,000 Lightning uses the aging method and estimates it will not collect 7% of accounts receivable not yet due, 21% of receivables up to 30 days past due, and 46% of receivables greater than 30 days past due. The accounts receivable balance of $10,400 consists of $7,500 not yet due, $1,600 up to 30 days past due, and $1,300 greater than 30 days past due. What is the appropriate amount of Bad Debt Expense

Answer 1

Lightning Inc.

Computation of Bad Debts Expense:

7% of $7,500 = $525

21% of $1,600 = 336

46% of $1,300 = 598

Total $1,459

Step-by-step explanation:

a) Data and Calculations:

Credit Sales $ 20,000

Accounts Payable 10,000

Accounts Receivable 10,400

Allowance for Uncollectible Accounts 400 credit

Cash Sales 20,000

Lightning uses the aging method and estimates it will not collect 7% of accounts receivable not yet due, 21% of receivables up to 30 days past due, and 46% of receivables greater than 30 days past due.

The accounts receivable balance of $10,400 consists of $7,500 not yet due, $1,600 up to 30 days past due, and $1,300 greater than 30 days past due.

Age Analysis of Accounts Receivable balance of $10,400

Not yet due up to 30 days greater than 30

past due days past due

Percentage 7% 21% 46%

Balance $7,500 $1,600 $1,300

Bad debts $525 $336 $598

Bad debts Expense = $1,459