Question

At year-end, Chief Company has a balance of $22,000 in accounts receivable of which $2,200 is more than 30 days overdue. Chief has a credit balance of $220 in the allowance for doubtful accounts before any year-end adjustments. Using the aging of accounts receivable method, Chief estimates that 1.0% of current accounts and 12% of accounts over thirty days are uncollectible. What is the amount of bad debt expense

Answer 1

Answer:

$242

Explanation:

If a company has a balance of $22,000 in accounts receivables of which $2,200 is more than 30days overdue, amount of receivables below 30days overdue

= $22,000 - $2,200

= $19,800

Allowance for doubtful debt

= (1.0% × $19,800 + 12% × $2,200)

= $198 + $264

= $462

Additional allowance required

= $462 - $220

= $242

This is the amount t of bad debts as the credit could be posted to allowance for

doubtful debt and the debit to bad debt account