On December 31 of the current year, the unadjusted trial balance of a company using the percent of receivables method to estimat
e bad debt included the following: Accounts Receivable, debit balance of $98,700; Allowance for Doubtful Accounts, credit balance of $1,111. What amount should be debited to Bad Debts Expense, assuming 6% of outstanding accounts receivable at the end of the current year are estimated to be uncollectible?
Assuming 6% of outstanding accounts receivable at the end of the current year are estimated to be uncollectible that would be,
= 6% * 98,700
= $5,922
The Allowance for Doubtful Accounts acts as a buffer for the business when bad debts are incurred.
Bad debts are taken from the Allowance as the Allowance has already been removed from the Receivables.
In cases where Bad debts exceed the buffer in the Allowance for Doubtful Debt Account we take everything in it and the remaining bad debt amount is debited to Bad Debt expense.
That would be,
= 5,922 - 1,111
= $4,811
$4,811 is the amount that should be debited to Bad Debts Expense.
<span>When a person insured under a policy for some period of time,
the term which is used is life insurance. Insured person is allowed to convert
a term policy to permanent policy later at any date in convertible term policy.
The factor that affect C the most when she tried to convert term policy to
whole life insurance is the cost.</span>
