At the End of Its First Year of Operations, December

question 17

Essay

At the end of its first year of operations, December 31, 2019, Felicity Ltd.'s accounts show the following amounts:
$\begin{array}{|l|lrr|} \hline\text { Accounts receivable } &\$1,845,000 \\\hline \text { Allowance for doubtful accounts, before any adjusting or dosing } &\\ \text { entries } &11,000 \text {Cr }\\\hline \text { Bad debt expense for 2019 prior to any adjusting or closing } &\\ \text {entries } &48,000 \text {Dr }\\\hline \text { Customer accounts written off as uncollectable during 2019 } &37,000\\\hline \end{array}$
The company estimates that the following amounts of accounts receivable will not be collectible:
$$\begin{array} { | l | c | c | c | c | c | } \hline \text { Days outstanding } & \mathbf { 0 } - \mathbf { 3 0 } & \mathbf { 3 1 } - \mathbf { 7 5 } & \mathbf { 7 6 } - \mathbf { 1 2 0 } & \mathbf { 1 2 0 } + & \text { Total } \\\hline \text { Amount } & 510,000 & 444,000 & 403,000 & 128,000 & 1,485,000 \\\hline \% \text { not collectible } & 5 \% & 9 \% & 15 \% & 28 \% & \ldots \\\hline\end{array}$$ What should be the amount of bad debt expense for the year ended December 31, 2019?

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Definitions:

Expected NPV

The anticipated net present value of an investment, taking into account the probability of different outcomes.

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Projections of how much money a company will generate or use in future periods, often used in investment analysis.

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Expected Cash Flows

Estimated cash inflows and outflows over a specific period, important for analyzing investments and financial planning.