P7-5 (Bad-Debt Reporting) If doubtful accounts are 3% of accounts receivable, determine the bad debt expense to be reported for 2014.

Age net debit balance % to be applied after correction is made

under 60 days $172342 1%

60-90 days 136490 3%

91-120 days 39924 6%

overs 120 days 23,644 $ 3700 definitely uncollectible;

=372400 estimated remainder uncollectible is 25%

2. The Accounts Receivable control account has a debit balance of $372,400 on December 31, 2014.

3. Two entries were made in the Bad Debt Expense account during the year: (1) a debit on December 31 for the amount credited to Allowance for Doubtful Accounts, and (2) a credit for $3,240 on November 3, 2014, and a debit to Allowance for Doubtful Accounts because of a bankruptcy.

4. Allowance for Doubtful Accounts is as follows for 2014.

Allowance for doubtful accounts

Nov. 3 Uncollectible accounts | Jan. 1 Beginning balance 8750

written off 3240 | Dec. 31 5% of $372400 18620

5. A credit balance exists in Accounts Receivable (6090 days) of $4,840, which represents an advance on a sales contract.