The trial balance before adjustment of Chloe Inc. shows the following balances:

Instructions
(a) Give the entry for bad debt expense for the current year assuming:
1. The allowance should be 4% of gross accounts receivable.
2. Historical records indicate that, based on accounts receivable aging, the following percentages will not be collected:

3. Allowance for Doubtful Accounts is $ 1,950 but it is a credit balance and the allowance should be 4% of gross accounts receivable.
4. Allowance for Doubtful Accounts is $ 1,950 but it is a credit balance and historical records indicate that the same percentages in (b) are to be used to determine the Allowance for Doubtful Accounts.
(b) From the perspective of an independent reviewer of Chloe's trial balance, comment on the unadjusted debit balance in Chloe's allowance for doubtful accounts at year end.

Transcribed Image Text:

Dr. Cr. Accounts receivable Allowance for doubtful accounts Sales revenue (all on credit) Sales returns and allowances $105,000 1,950 $684,000 30,000 Percentage Estimated to Be Uncollectible Balance $36,000 48,000 196 0-30 days outstanding 31-60 days outstanding 5% Balance 12,200 8,800 Percentage Estimated to Be Uncollectible 12% 18% 61-90 days outstanding Over 90 days outstanding