Question

Crimson Inc. recorded credit sales of $811,000, of which $580,000 is not yet due, $140,000 is past due for up to 180 days, and $91,000 is past due for more than 180 days. Under the aging of receivables method, Crimson Inc. expects it will not collect 4% of the amount not yet due, 11% of the amount past due for up to 180 days, and 27% of the amount past due for more than 180 days. The allowance account had a debit balance of $3,800 before adjustment. After adjusting for bad debt expense, what is the ending balance of the allowance account?

Answer 1

Answer:

The ending balance of the allowance account is $76,060

Explanation:

not yet due accounts = $580,000

Bad Debts for not yet due accounts = $580,000*0.05 =$29,000.

Accounts receivable due for up to 180 days = $140,000

Bad Debts for accounts receivable > 180 days = $140,000*0.14 = $19,600.

Accounts receivable due for more than 180 days = $91,000

Bad Debts for accounts receivable due for more than 180 days = $91,000*0.26 = $23,660.

Ending balance of Allowance account = Debit Balance of allowance account + bad debt for not yet due accounts received + bad debts for accounts receivable due up to 180 days + bad debts for accounts receivable due for more than 180 days.

         = $3,800+29,000+$19,600+$23,660

        = $76,060.