Rand Construction Inc Uses the Aging Method to Estimate Bad

question 38

Essay

Rand Construction Inc uses the aging method to estimate bad debts.During 2014, before recording its adjusting entries, the firm wrote off $2,000 of accounts receivable, leaving a $400 credit in its allowance for doubtful accounts.After the write-offs, based on historical experience and a careful review of the company's receivables, the company's accountant prepared the following aging schedule: $$\begin{array} { l r r } \text { Age } & \text { Amount } & \text { Estimated uncollectible } \\\hline \text { Not past due } & \$ 40,000 & 2 \% \\1 - 30 \text { days overdue } & 18,000 & 6 \% \\\text { Over 30 days } & 4,000 & 20 \%\end{array}$$ Required:
A) What is the bad debt expense for 2014?
B) After recording the bad debt expense what is the final balance in the allowance for doubtful accounts? C) At what amount would the accounts receivable be shown on the balance sheet?

• A) What is the bad debt expense for 2014?
• B) After recording the bad debt expense what is the final balance in the allowance for doubtful accounts? C) At what amount would the accounts receivable be shown on the balance sheet?

---

Definitions:

Causal Factors

Elements or conditions that contribute to the occurrence of an event or the existence of a condition.

Method of Residues

A scientific and logical method where the known causes of a set of phenomena are subtracted to reveal the remaining causes.

Method of Residues

A method of scientific reasoning where one deducts from a complex set of phenomena the parts already explained, in order to isolate the remainder for new analysis.

Necessary Condition

A prerequisite that must be present for a certain effect or outcome to occur.