The ADA has the below table regarding its account receivable: Age of Accounts Balance, June 30 Estimated Percentage Uncollectible 1-30 days $130,000 2.00% 31-60 days 70,000 5.00% 61-90 days 32,500 20.00% Over 90 days 3,000 50.00% If the opening balance of Allowance for Doubtful accounts is $7,050, the entries to record estimated uncollectible receivables this year will be: Select one: a. Bad debt expense $7,050 Allowance for doubtful accounts $7,050 b. Allowance for doubtful accounts $14,100 Account receivable $14,100 c. Bad debt expense $14,100 Allowance for doubtful accounts $14,100 d. Account receivable $7,100 Bad debt expense $7,100
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.
The ADA has the below table regarding its
|
Age of Accounts |
Balance, June 30 |
Estimated Percentage Uncollectible |
|
1-30 days |
$130,000 |
2.00% |
|
31-60 days |
70,000 |
5.00% |
|
61-90 days |
32,500 |
20.00% |
|
Over 90 days |
3,000 |
50.00% |
If the opening balance of Allowance for Doubtful accounts is $7,050, the entries to record estimated uncollectible receivables this year will be:
Allowance for doubtful accounts $7,050
Account receivable $14,100
Allowance for doubtful accounts $14,100
Bad debt expense $7,100
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