Marian Company uses the allowance method of accounting for bad debts. The following summary schedule was prepared from an aging of accounts receivable outstanding on December 31 of the current year: No. of Days Outstanding Amount Probability of Collection 0 to 30 days 5,000,000 98% 31 to 60 days 2,000,000 90% Over 60 days 1,000,000 80% The following additional information is available for the current year: Net credit sales for the year 40,000,000 Allowance for doubtful accounts: Balance, January 1 450,000 (cr) Balance before adjustment, December 31 20,000 (dr) If Marian Company bases its estimate on the aging of accounts receivable, what is the amount of doubtful accounts expense for the current 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.
3. Marian Company uses the allowance method of accounting for
| No. of Days Outstanding | Amount | Probability of Collection |
| 0 to 30 days | 5,000,000 | 98% |
| 31 to 60 days | 2,000,000 | 90% |
| Over 60 days | 1,000,000 | 80% |
The following additional information is available for the current year:
| Net credit sales for the year | 40,000,000 |
| Allowance for doubtful accounts: | |
| Balance, January 1 | 450,000 (cr) |
| Balance before adjustment, December 31 | 20,000 (dr) |
If Marian Company bases its estimate on the aging of accounts receivable, what is the amount of doubtful accounts expense for the current year?
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