Question

# DONT attempt it if you CANT attempt!! SHOW all work clearly!! As of 2013 Year End...

DONT attempt it if you CANT attempt!! SHOW all work clearly!!

As of 2013 Year End before adjusting journal entries, the Colorful Company has accounts receivable in the amount of \$255,000 and allowance of doubtful account of \$3,050. The \$255,000 accounts receivable includes \$150,000, \$100,000, and \$5,000 that has been outstanding for 10 days, 40 days and 75 days respectively. The company’s historical records show that for accounts of these ages, the likelihood of collectability is about 99.5%, 98% and 90% respectively. Calculate the bad debt expense for 2013.

 Accounts receivable Due Estimated % Uncollectible Estimated Uncollectible \$150,000 10 days 0.5% (100%-99.5%) \$750 (\$150,000*0.5%) \$100,000 40 days 2% (100%-98%) \$2,000 (\$100,000*2%) \$5,000 75 days 10% (100%-90%) \$500 (\$5,000*10%) \$3,250

Ending balance in Allowance for uncollectible = \$3,250

Beginning balance in Allowance for uncollectible = \$3,050

Bad debt expense = Ending balance in Allowance for uncollectible - Beginning balance in Allowance for uncollectible

= \$3,250 - \$3,050

= \$200

The bad debt expense for 2013 = \$200

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