Brown Cow Dairy uses the aging approach to estimate Bad Debt Expense. The balanc

Question

Brown Cow Dairy uses the aging approach to estimate Bad Debt Expense. The balance of each account receivable is aged on the basis of three time periods as follows: (1) 1-30 days old, $12,600; (2) 31-90 days old, $5,600, and (3) more than 90 days old, $3,600. Experience has shown that for each age group, the average loss rate on the amount of the receivable due to uncollectibility is (1) 5 percent, (2) 10 percent, and (3) 15 percent, respectively. At December 31 (end of the current year), the Allowance for Doubtful Accounts balance was $860 (credit) before the end-of-period adjusting entry is made. Required: 1. Prepare a schedule to estimate an appropriate year-end balance for the Allowance for Doubtful Accounts. 1-30 31-90 Total > 90 Accounts Receivable Estimated Uncollectible (%) Estimated Uncollectible (S) 2. What amount of Bad Debt Expense should be recorded on December 31? t of Bad Debt Expense 3. If the unadjusted balance in the Allowance for Doubtful Accounts was a $660 debit balance, what amount of Bad Debt Expense should be recorded on December 31? t of Bad Debt E

Explanation / Answer

1) Prepare schedule :

2) Bad debt expense = 1730-860 = 870

3) Bad debt expense = 1730+660 = 2390

1-30 31-90 More than 90 Total Account receivable 12600 5600 3600 Estimated uncollectible (%) 5% 10% 15% Estimated uncollectible ($) 630 560 540 1730

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