Problem 5-86B (Algorithmic) Determining Bad Debt Expense Using the Aging Method

At the beginning of the year, Lennon Electronics had an accounts receivable balance of $29,800 and a balance in the allowance for doubtful accounts of $2,425 (credit). During the year, Lennon had credit sales of $752,693, collected accounts receivable in the amount of $653,800, wrote off $20,400 of accounts receivable, and had the following data for accounts receivable at the end of the period:

Accounts Receivable Age		Amount		Proportion Expected to Default
Current		$20,200		0.01
115 days past due		8,600		0.04
1645 days past due		4,900		0.09
4690 days past due		3,200		0.17
Over 90 days past due		2,100		0.30
		$39,000

Required:

1. Determine the desired postadjustment balance in allowance for doubtful accounts, round amounts to nearest dollar for each aging category, if required. $

2. Determine the balance in allowance for doubtful accounts before the bad debt expense adjusting entry is posted. $

3. Compute bad debt expense. $

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4. Prepare the adjusting entry to record bad debt expense.

	Record adjusting entry for bad debt expense estimate