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 Current 1-15 days past due 16-45 days past due 46-90 days past due Over 90 days past due Required: Amount $20,800 5,300 3,100 3,600 2,400 $35,200 Proportion Expected to Default 0.01 0.02 0.08 0.15 0.30 1. Determine the desired postadjustment balance in allowance for doubtful accounts. 1,818 X 3. Compute bad debt expense. 17,438 X 2. Determine the balance in allowance for doubtful accounts before the bad debt expense adjusting entry is posted. 15,620

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Bad Debts

At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.  

Accounts Receivable

The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.