Question
Chiller Company has credit sales of $5.60 million for year 2013. Accounts Receivable total $1,565,170 and the company estimates that 1.32% of the credit sales
Chiller Company has credit sales of $5.60 million for year 2013. Accounts Receivable total $1,565,170 and the company estimates that 1.32% of the credit sales will not be collected. Historically, 4% of outstanding accounts receivable is uncollectible. On December 31, 2013, the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $3,561. Chiller prepares a schedule of its December 31, 2013, accounts receivable by age. Based on past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here:
Assuming the company uses the percent of accounts receivable method, what is the amount that Chiller will enter as the Bad Debt Expense in the December 31 adjusting journal entry?
A. $59,045.80
B. $51,878.41
C. $48,317.41
D. $70,359.00
E. $66,167.80
The correct answer is supposed to be $59,045.80 but I am having trouble figuring out why that is the case. When I compute the problem, I end up with $48,317.41. Please help and show work.
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