Brown Cow Dairy uses the aging approach to estimate Bad Debt Expense. The balance of each account
Question:
(1) 1– 30 days old, $ 12,000;
(2) 31– 90 days old, $ 5,000; and
(3) More than 90 days old, $ 3,000.
Experience has shown that for each age group, the average loss rate on the amount of the receivable due to uncollectibility is
(1) 5 percent,
(2) 10 percent, and
(3) 20 percent, respectively.
At December 31 (end of the current year), the Allowance for Doubtful Accounts balance was $ 800 (credit) before the end-of-period adjusting entry is made.
Required:
1. Prepare a schedule to estimate an appropriate year-end balance for the Allowance for Doubtful Accounts.
2. What amount of Bad Debt Expense should be recorded on December 31?
3. If the unadjusted balance in the Allowance for Doubtful Accounts was a $ 600 debit balance, what amount of Bad Debt Expense should be recorded on December 31?
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Related Book For
Fundamentals of Financial Accounting
ISBN: 978-0078025914
5th edition
Authors: Fred Phillips, Robert Libby, Patricia Libby
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