Sullivan Co.'s accounts receivable show the following balances by age:
- Age of Receivable Balance
- 0-30 days $600,000
- 31-60 days 175,000
- 61-120 days 70,000
- more than 120 days 10,000
The credit balance in the allowance for uncollectible accounts is $2,500. Sullivan Co. uses the following percentages to compute the estimated amounts of receivables that will eventually prove uncollectible: 0-30 days, 0.7%; 31-60 days, 1.2%; 61-120 days, 11%; and more than 120 days, 65%.
a) Compute the balance in the allowance for doubtful accounts at year end
b) Compute the bad debt expense for the year