Question

During Year 1, Ramona Department Store had total sales of $1,500,000, of which 80% were on credit. The beginning balance in Accounts Receivable (on January 1 of Year 1) was $82,500. The beginning balance in the Allowance for Bad Debts (on January 1 of Year 1) was $10,000. The amount of accounts written off as uncollectible during the year was $13,500.

The following aging of Accounts Receivable is for Ramona Company at the end of Year 1.

Aging of Accounts Receivable
December 31 of Year 1
	Total	Less than 30 Days	31 Days to 60 Days	61 Days to 90 Days	Over 90 Days
	$246,000	$183,000	$36,000	$12,000	$15,000

Ramona Company has developed the following bad debt information from its own past experience.

Age of Account	Percent Ultimately Uncollectible
Less than 30 days	2
31 to 60 days	12
61 to 90 days	35
Over 90 days	90

Ramona Company uses the aging method to determine its ending Allowance for Bad Debts balance. What is the appropriate Allowance for Bad Debts balance as of the end of Year 1?

Group of answer choices

$22,980

$25,680

$25,000

$28,500

$27,000

$13,500

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet.