Temper Company Has Credit Sales of $3 Assuming the Company Uses the Percent of Accounts Receivable Method,what

question 101

Multiple Choice

Temper Company has credit sales of $3.10 million for year 2010.Temper estimates that 2% of accounts receivable will remain uncollectible.Historically,.9% of sales have been uncollectible.On December 31,2010,the company's Allowance for Doubtful Accounts has an unadjusted debit balance of $2,575.Temper prepares a schedule of its December 31,2010,accounts receivable by age.Based on past experience,it estimates the percent of receivables in each age category that will become uncollectible.This information is summarized here:
$$\begin{array} {c l c} \begin{array} { c } \text { December 31,2010 } \\\text { Accounts Receivable }\end{array} & { \begin{array} { c } \text { Age of Accounts } \\\text { Receivable }\end{array} } & \begin{array} { c } \text { Expected Percent } \\\text { Uncollectible }\end{array} \\\hline 620,000 & \text { Not yet due } & 1.05 \% \\248,000 & 1 \text { to } 30 \text { days past due } & 1.80 \\49,600 & 31 \text { to } 60 \text { days past due } & 6.30 \\24,800 & \text { 61 to } 90 \text { days past due } & 31.75 \\4,960 & \text { Over } 90 \text { days past due } & 66.00\end{array}$$
Assuming the company uses the percent of accounts receivable method,what is the amount that Temper will enter as the Bad Debt Expense in the December 31 adjusting journal entry?

• A)$18,947.20
• B)$16,372.20
• C)$23,024.40
• D)$27,900.00
• E)$21,522.20

---

Definitions:

Equipment Account

An account in financial statements that represents the cost of equipment purchased by a business, excluding any accumulated depreciation.

Land Improvements

An asset account that records improvements made to land; such improvements have a limited life and are subject to depreciation (examples are a driveway or fences).

Limited Life

A term often used to describe the finite existence or duration of certain entities or agreements.

Installation Costs

The expenses associated with setting up equipment or machinery for use, which can include labor, materials, and other direct or indirect costs.