Question
ABC Ltd. has a credit balance of $1,000 for the allowance for doubtful debts account at the end of the year, prior to the year-end
ABC Ltd. has a credit balance of $1,000 for the allowance for doubtful debts account at the end of the year, prior to the year-end adjustment and bad debt written-off. The bad debts are estimated following the aging schedule. Based on past experience, ABC Ltd. determines the percentage of expected credit losses in each age group as follows: Percentage of expected credit losses Amount of Accounts Receivable Not yet due 1% $8,200 1-30 days past due 3% $1,500 31-60 days past due 10% $4,000 61-90 days past due 20% $1,000 Over 90 days past due 50% $800 In addition, during this year, one of ABC Ltd.s customers has gone bankrupt and is unable to pay back a balance of $200. Which of the following amount of adjustments should be made to the bad debt expense at the end of the period? Select one: a. $527 b. $927 c. $327 d. $1,127
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