Question
ABC Corporation recently completed its fiscal year-end on December 31, 2022. The company uses the allowance method for accounting for bad debts. The accounts receivable
ABC Corporation recently completed its fiscal year-end on December 31, 2022. The company uses the allowance method for accounting for bad debts. The accounts receivable balance as of December 31, 2022, was $500,000. The aging analysis of accounts receivable indicates the following:
- 60% of accounts receivable are less than 60 days old and are expected to be fully collected
- 30% of accounts receivable are between 60 and 90 days old and are expected to be collected, but a provision of 3% is needed for possible bad debts
- 10% of accounts receivable are over 90 days old and are considered uncollectible, and a provision of 30% is needed for bad debts.
Calculate the amount of bad debt expense that ABC Corporation should record for the year ended December 31, 2022.
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Accounting concepts and applications
Authors: Albrecht Stice, Stice Swain
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