Question

At year-end, Chief Company has a balance of $12,000 in accounts receivable of which $1,200 is more than 30 days overdue. Chief has a credit balance of $120 in the allowance for doubtful accounts before any year-end adjustments. Using the aging of accounts receivable method, Chief estimates that 1.5% of current accounts and 12% of accounts over thirty days are uncollectible. What is the amount of bad debt expense? Multiple Choice

$306.

$186.

$426.

$120.

Answer 1

Allowance for doubtful accounts = $120

Due	Accounts receivable	Percentage uncollectible	Allowance for doubtful accounts
Current	10,800	1.5%	10,800 x 1.5% = 162
30 Days	1,200	12%	1,200 x 12% = 144
			$306

Bad debt expense = Allowance for doubtful expense, ending - Allowance for doubtful accounts, beginning

= 306 - 120

= $186

Second option is the correct option

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