DETERMINING BAD DEBT EXPENSE USING THE AGING METHOD
At the beginning of the year, Tennyson Auto Parts had an accounts receivable balance of $31,800 and a balance in the allowance for doubtful accounts of $2,980 (credit). During the year Tennyson had credit sales of $624,300, collected accounts receivable in the amount of $602,700, wrote off $18,600 of accounts receivable, and had the following data for accounts receivable at the end of the period:
Accounts Receivable Age Amount Proportion Expected to Default
|
Current
|
$20,400
|
0.01
|
|
1-15 days past due
|
5,300
|
0.02
|
|
16-45 days past due
|
3,100
|
0.08
|
|
46-90 days past due
|
3,600
|
0.15
|
|
Over 90 days past due
|
2,400
|
0.30
|
|
|
$34,800
|
|
Required:
1. Determine the desired postadjustment balance in allowance for doubtful accounts.
2. Determine the balance in allowance for doubtful accounts before the bad debt expense adjusting entry is posted.
3. Compute bad debt expense.
4. Prepare the adjusting entry to record bad debt expense.