A Company Uses the Aging of Accounts Receivable Method to Estimate

question 19

Essay

A company uses the aging of accounts receivable method to estimate its bad debts expense. On December 31 of the current year an aging analysis of accounts receivable revealed the following:

Required:
a. Calculate the amount of the Allowance for Doubtful Accounts that should be reported on the current year-end balance sheet
b. Calculate the amount of the Bad Debts Expense that should be reported on the current year's income statement, assuming that the balance of the Allowance for Doubtful Accounts on January 1 of the current year was $44,000 and that accounts receivable written off during the current year totaled $49,200
c. Prepare the adjusting journal entry to record bad debts expense on December 31 of the current year
d. Show how Accounts Receivable will appear on the current year-end balance sheet as of December 31

---

Definitions:

Fixed Expenses

Costs that do not change with the level of production or sales activities within a certain range and time period.

Break-Even

Break-even is the point at which total costs and total revenue are equal, resulting in no net loss or gain.

Seed Division

A segment within a business or organization that focuses on developing new ideas, projects, or business lines from their initial stages.

Fixed Expenses

Costs that do not change with the level of production or sales within a certain range, such as rent and salaries.