Question
Part A . On 12/31/16, Phoebe Companys balance sheet revealed a $7,000 balance in its allowance for doubtful accounts. During 2017, $2,000 of accounts were
Part A. On 12/31/16, Phoebe Companys balance sheet revealed a $7,000 balance in its allowance for doubtful accounts. During 2017, $2,000 of accounts were written off and $500 of accounts receivable previously written off were collected. On 12/31/17, bad debt expense was estimated to be 5% on net credit sales, which were $400,000
Required: Calculate the balance in the allowance for doubtful accounts on 12/31/17.
Part B. The following information was taken from the unadjusted trial balance and aging schedule of Diane Company on December 31, 2017. All sales are on account.
Accounts and related balances at December 31, 2017 before adjustment:
| Debit | Credit |
Accounts receivable | $46,000 |
|
Allowance for doubtful accounts |
| $ 680 |
Sales (all on account) |
| 500,000 |
Sales returns | 3,000 |
|
Aging Schedule of Accounts Receivable:
Age | Amount | % Uncollectible |
0-30 days | $14,000 | 5% |
30-60 days | 20,000 | 8% |
Over 60 days | 12,000 | 12% |
Required: If Diane uses the aging schedule of accounts receivable to determine bad debts, what is the bad debt expense for the year ending December 31, 2017?
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