Question
S & R Company uses the aging of accounts receivable approach to estimate bad debt expense. On December 31, 2020, an analysis of accounts receivable
S & R Company uses the aging of accounts receivable approach to estimate bad debt expense. On December 31, 2020, an analysis of accounts receivable revealed the following:
Required:
(a) Calculate the amount of allowance for doubtful accounts that should be reported on the balance sheet at December 31, 2020. (3 marks)
(b) Calculate the amount of bad debts expense that should be reported on the 2020 income statement, assuming that the balance of Allowance for Doubtful Accounts on January 1 was $44,000 (credit balance) and accounts receivable written off during the year totaled$49,200.(2 marks)
(c) Present the appropriate general journal entry to record bad debts expense on December 31, 2020. (2 marks)
(d) Show how accounts receivable will appear on the balance sheet at December 31,2020.(3 marks)
Schedule of Accounts Receivable by Age
Dec. 31, 2020Age of AccountsExpected %Allowance for
AccountsReceivableUncollectibledoubtful accounts
Receivable
140,000Not yetdue0.75%
60,0001-30 days pastdue4%
19,00031-60 days pastdue10%
5,00061-90 days pastdue60%
7,000Over 90 days pastdue90%
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