Question

Crimson Inc. recorded credit sales of $811,000, of which $550,000 is not yet due, $190,000 is past due for up to 180 days, and $71,000 is past due for more than 180 days. Under the aging of receivables method, Crimson Inc. expects it will not collect 6% of the amount not yet due, 18% of the amount past due for up to 180 days, and 22% of the amount past due for more than 180 days. The allowance account had a debit balance of $1,800 before adjustment. After adjusting for bad debt expense, what is the ending balance of the allowance account?

Answer 1

Answer:

$84,620

Explanation:

Given:

Credit sales = $811,000

Accounts receivable not yet due = $550,000

Bad Debts for accounts receivable not yet due = $550,000 × 0.06

= $33,000

Accounts receivable due for up to 180 days = $190,000

Bad Debts for accounts receivable due for up to 180 days

= $190,000 × 0.18

= $34,200

Accounts receivable due for more than 180 days = $71,000

Bad Debts for accounts receivable due for more than 180 days

= $71,000 × 0.22

= $15,620

Ending balance of Allowance account

= Debit Balance of allowance account + $33,000 + $34,200 + $15,620

= $1,800 + $33,000 + $34,200 + $15,620

= $84,620