Question
Johnson Company has evaluated its receivables, and has identified the following possible credit losses: Note #1 has recently deteriorated in credit quality. For Note #1,
Johnson Company has evaluated its receivables, and has identified the following possible credit losses:
Note #1 has recently deteriorated in credit quality. For Note #1, Johnson estimates the present value of credit losses occurring in the next twelve months is $50,000, and the present value of credit losses occurring after twelve months is $20,000.
Note #2 has not deteriorated in credit quality. For Note #2, Johnson estimates the present value of credit losses occurring in the next twelve months is $5,000, and the present value of credit losses occurring after twelve months is $10,000.
If Johnson is using the CECL model, it would recognize a bad debt expense of: A) $50,000. B) $55,000. C) $75,000. D) $85,000
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