Question
Raintree Cosmetic Company sells its products to customers on a credit basis. An adjusting entry for bad debt expense is recorded only at December 31,
Raintree Cosmetic Company sells its products to customers on a credit basis. An adjusting entry for bad debt expense is recorded only at December 31, the company's fiscal year-end. The 2016 balance sheet disclosed the following:
Current Assets: Receivables (net of allowance for uncollectible accounts of $34974) $440016
During 2017, credit sales were $1606341, cash collections from customers $1801136, and $34868 in accounts receivable were written off. In addition, $3211 was collected from a customer whose account was written off in 2016. An aging of accounts receivable at December 31, 2017, reveals the following:
Age Group | % of year-end AR in Group | % Uncollectible |
0 - 60 days | 65% | 4% |
61 - 90 days | 20% | 15% |
90 - 120 days | 10% | 25% |
Over 120 days | 5% | 40% |
Required: Calculate the amount of the year-end adjusting entry for bad debts expense. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is determined by an aging of accounts receivable. Answer in dollars and cents ($ 0.00 ).
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