Crimson Inc. recorded credit sales of $834,000, of which $570,000 is not yet due
ID: 2499539 • Letter: C
Question
Crimson Inc. recorded credit sales of $834,000, of which $570,000 is not yet due, $200,000 is past due for up to 180 days, and $64,000 is past due for more than 180 days. Under the aging of receivables approach, Crimson Inc. expects it will not collect 5% of the amount not yet due, 14% of the amount past due for up to 180 days, and 26% of the amount past due for more than 180 days. The allowance account had a debit balance of $3,900 before adjustment. After adjusting for bad debt expense, what is the ending balance of the allowance account? $60,240 $77,040 $73,140 $28,500
Explanation / Answer
Accounts recievable not yet due = $570,000
Bad Debts for accounts receivable not yet due = $570,000*0.05 =$28,500.
Accounts recievable due for upto 180 days = $200,000
Bad Debts for accounts receivable due for uoto 180 days = $200,000*0.14 = $28,000.
Accounts recievable due for more than 180 days = $64,000
Bad Debts for accounts receivable due for more than 180 days = $64,000*0.26 = $16,640.
Ending balance of Allowance aoount = Debit Balance of allowance account + $28,500+$28,000+$16,640
= $3,900+28,500+$28,000+$16,640
= $77,040.
Therefore, the correct answer is option B.
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