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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Bad Debt Expense: Aging Method

Glencoe Supply had the following accounts receivable aging schedule at the end of a recent year.

Chapter 5, Problem 68E, Bad Debt Expense: Aging Method Glencoe Supply had the following accounts receivable aging schedule

The balance in Glencoe’s allowance for doubtful accounts at the beginning of the year was $58,620 (credit). During the year, accounts in the total amount of $62,400 were written off.

Required:

1. Determine bad debt expense.

2. Prepare the journal entry to record bad debt expense.

3. If Glencoe had written off $90,000 of receivables as uncollectible during the year, how much would bad debt expense reported on the income statement have changed?

To determine

(a)

Aging method:

This is a method in which the receivables are sorted according to their collectable estimation. This is done on the basis of their outstanding invoices period. Basically, aging means to check the how old an outstanding balance of receivable is present in the books.

The computation of bad debt expense.

Explanation

The Glencoe Supply accounts receivables and balance in allowance for doubtful accounts for the Glencoe Supply is as follows:

Accounts Receivables Amount ($) Proportion expected Allowance required ($)
Current 3,10,500 0.005 1,553
130 days past due 47,500 0.01 475
3145 days past due 25,000 0.13 3,250
4690 days past due 12,800 0.20 2,560
91135 days past due 6,100 0
To determine

(b)

Aging method:

This is a method in which the receivables are sorted according to their collectable estimation. This is done on the basis of their outstanding invoices period. Basically, aging means to check the how old an outstanding balance of receivable is present in the books.

The necessary adjusting journal entry for recording the bad debt.

To determine

(a)

Aging method:

This is a method in which the receivables are sorted according to their collectable estimation. This is done on the basis of their outstanding invoices period. Basically, aging means to check the how old an outstanding balance of receivable is present in the books.

The computation of bad debt expense after changing in the written off amount.

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