Question

Domino Company uses the aging of accounts receivable method to estimate uncollectible accounts expense. Domino began Year 2 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $43,050 and $3,350, respectively. During the year, the company wrote off $2,570 in uncollectible accounts. In preparation for the company's Year 2 estimate, Domino prepared the following aging schedule: Number of days Receivables % Likely to be past due amount uncollectible Current $ 67,000 1% 0-30 26,000 5% 31-60 6,460 10% 61-90 3,220 25% Over 90 2,900 50% Total $ 105,580 What will Domino record as Uncollectible Accounts Expense for Year 2?

Answer 1

Answer:

Bad debts expense for the year                            $ 4,091

Explanation:

Computation of allowance for uncollectible accounts

Ageing Days                 Balance        % Uncollectible             Uncollectible

                                           $                                                     amount  $

 Current                       67,000                     1 %                               670

 0 - 30 days                 26,000                    5 %                            1,300

 31 - 60 days                 6,460                     10 %                              646

 61 - 90 days                 3,220                     25 %                             805

Over 90 days                2,900                    50 %                         1,450

Totals                            105,580                                                    4,871

Computation of bad debts expense for the year

Opening balance allowance for uncollectible accounts             3.350

Less: Accounts written off during the year                                   2,570

Pre adjusted balance allowance for uncollectible accounts          780

Bad debts expense for the year =

(required balance - pre adjusted balance = $ 4,871 - $ 780   $  4,091