Answered: Accounting Question

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Step 1 Introduction

Bad debts: It is a receivable that is now irrecoverable from that person who was supposed to pay the same. The reason for nonpayment by the debtors is that either they go bankrupt, have financial problems, or collection by the creditors due to various reasons is not possible.

Step 2 Computation of bad debt expenses for the year

Aged account receivable	Working note	Amount ($)	Estimated percentage uncollectable	Estimated amount Uncollectible Amount ($)
Not yet due	1	16,800	2%	336
Up to 120 days past due	2	6,700	15%	1,005
Over 120 days past due	3	4,200	36%	1,512
Estimated balance in the allowance for doubtful accounts				2,853
Less: Current balance in the allowance for doubtful accounts				(900)
Bad debt expenses for the current year				1,953