Brown Company uses the following categories and probabilities to age its receivables:
|
Age
|
Balance
|
Probability of Default
|
|
1-120 days
|
$70,000
|
2%
|
|
Over 120 days
|
30,000
|
6%
|
(a) Determine estimated bad debts.
(b) Prepare the necessary entry. Assume that the allowance account has a credit balance of $2,600.