1. Prepare the appropriate bad debt expense adjusting entry for the current year. 2. Show how the various accounts related to accounts receivable should be shown on the December 31, current year, balance sheet.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
![E6-14 (Algo) Recording and Reporting
a Bad Debt Estimate Using Aging
Analysis LO6-2
Casilda Company uses the aging approach to estimate
bad debt expense. The ending balance of each account
receivable is aged on the basis of three time periods as
follows: (1) not yet due, $50,800; (2) up to 180 days past
due, $15,600; and (3) more than 180 days past due,
$4,500. Experience has shown that for each age group,
the average loss rate on the amount of the receivables at
year-end due to uncollectibility is (1) 2 percent, (2) 11
percent, and (3) 31 percent, respectively. At December 31,
the end of the current year, the Allowance for Doubtful
Accounts balance is $100 (credit) before the end-of-
period adjusting entry is made.
Required:
1. Prepare the appropriate bad debt expense adjusting
entry for the current year.
2. Show how the various accounts related to accounts
receivable should be shown on the December 31,
current year, balance sheet.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F92a8e72d-383d-463b-bdb7-cfb5502060ab%2F34d93656-f85a-4a02-b640-15e639a2a65a%2F4xi7ayc_processed.png&w=3840&q=75)
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