Concord Corporation had record sales in 2020. It began 2020 with
an Accounts Receivable balance of $490,000 and an Allowance for
Doubtful Accounts of $36,000. Concord recognized credit sales
during the year of $6,665,000 and made monthly adjusting entries
equal to 0.5% of each month’s credit sales to recognize bad debt
expense. Also during the year, the company wrote off $36,500 of
accounts that were deemed to be uncollectible, although one
customer whose $4,300 account had been written off surprised
management by paying the amount in full in late September.
Including this surprise receipt, $6,530,000 cash was collected on
account in 2020.
To assess the reasonableness of the allowance for doubtful
accounts, the controller prepared the following aged listing of the
receivables at December 31, 2020:
Days Account Outstanding | Amount | Probability of Collection | ||
Less than 16 days | $313,300 | 98% | ||
Between 16 and 30 days | 120,000 | 91% | ||
Between 31 and 45 days | 79,000 | 80% | ||
Between 46 and 60 days | 37,800 | 71% | ||
Between 61 and 75 days | 18,400 | 52% | ||
Over 75 days | 24,300 | 0% | ||
$592,800 |
Prepare the adjusting entry to bring the Allowance for Doubtful Accounts to its proper balance at year end???
What is the dollar effect of the year-end bad debt adjustment on the before-tax income $. ?
The year-end bad debt adjustment would decrease before-tax income $ ?
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