Question

Mellon Corporation The data presented below is Mellon Corporation for the year ended December 31, 2015: Sales (100% on credit) $1,500,000 Sales returns 60,000 Accounts Receivable (December 31,2015) 250,000 Allowance for Doubtful Accounts [Credit Balance] (Before adjustment at December 31, 2015) 3,000 Estimated amount of uncollectible accounts based on an aging analysis 31,000 Refer to the data for Mellon Corporation. If Mellon uses the aging of accounts receivable approach to estimate its bad debts, what amount will be reported as bad debt expense for 2015

Answer 1

Answer:

The bad debts expense for 2015 would be $ 28,000

Explanation:

The balance of the allowance for doubtful account should be equal to the amount estimated to be uncollectible based on the ageing analysis

Estimated uncollectible account                                                 $ 31,000

Allowance for doubtful accounts prior to adjustment               $   3,000

Bad debts expense for the year to be recorded                     $ 28,000

The accounting entry to record this is as follows:

Bad debts expense                                          Debit               $ 28,000

Allowance for uncollectible accounts            Credit                               $ 28,000