Glencoe Supply had the following accounts receivable aging schedule at the end of a recent year. Accounts Receivable Age Amount Proportion Expected to Default Allowance Required Current $310,500 0.005 $1,553 1–30 days past due 47,500 0.01 475 31–45 days past due 25,000 0.13 3,250 46–90 days past due 12,800 0.20 2,560 91–135 days past due 6,100 0.25 1,525 Over 135 days past due 4,200 0.60 2,520 $11,883 The balance in Glencoe's allowance for doubtful accounts at the beginning of the year was $58,620 (credit). During the year, accounts in the total amount of $62,400 were written off. Required: 1. Determine bad debt expense. $ 2. Prepare the journal entry to record bad debt expense. (Record adjusting entry for bad debt expense estimate) 3. By how much would bad debt expense reported on the statement of earnings have changed if Glencoe had written off $90,000 of receivables as uncollectible during the year?
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.
Glencoe Supply had the following
Accounts Receivable |
Age Amount |
Proportion Expected to Default |
Allowance Required |
|||
| Current | $310,500 | 0.005 | $1,553 | |||
| 1–30 days past due | 47,500 | 0.01 | 475 | |||
| 31–45 days past due | 25,000 | 0.13 | 3,250 | |||
| 46–90 days past due | 12,800 | 0.20 | 2,560 | |||
| 91–135 days past due | 6,100 | 0.25 | 1,525 | |||
| Over 135 days past due | 4,200 | 0.60 | 2,520 | |||
| $11,883 |
The balance in Glencoe's allowance for doubtful accounts at the beginning of the year was $58,620 (credit). During the year, accounts in the total amount of $62,400 were written off.
Required:
1. Determine bad debt expense.
$
2. Prepare the
| (Record |
3. By how much would bad debt expense reported on the statement of earnings have changed if Glencoe had written off $90,000 of receivables as uncollectible during the year?
$
Trending now
This is a popular solution!
Learn your way
Includes step-by-step video
Step by step
Solved in 2 steps
