Question

The company estimates future uncollectible accounts. The company determines $14,000 of accounts receivable on January 31 are past due, and 30% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 5% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.) Record bad debts at the end of January.

Answer 1

Answer:

Bad debt expense = $4,690

Explanation:

Entry                                                 DEBIT       CREDIT

Bad debt Expense                         $4,690

Allowance for doubtful debt                           $4,690

In Order to record bad debt expense, we need to go through some minor workings.

Workings

Receivables on January 31  past due =  $14,000 x 30% = $4,200

Receivable not past due = ($14,000 x 70%) x5% = $490

Bad debt expense = Receivables on January 31  past due + Receivable not past due

Bad debt expense = $4,200 + $490

Bad debt expense = $4,690