Answer:
A. Bad debt expense workings
Estimated loss =
0 - 30 days 1% of $90,000 = $900
31 - 60 days 2% of $20,000 = $400
61 - 120 days 5% of $11,000 = $550
121 - 180 days 10% of $6,000= $600
Over 180 days 25% of $4,000 = $1,000
Total Estimated loss = $3,450
Pre-adjusted bal of Uncollectible debt Account = $520
Balance to reflect in the Financial statement will be adjusted to reflect $3,450 just computed.
Addition to the Expense will be $3,450 minus $520 = $2,930
B.
Financial statement Effect template
Cash Asset = -$2,930
+
Non - Cash Asset = $0
=
Liability = $0
+
Contributed Capital = $0
+
Earned Capital -$2,930
C.
Account Receivable as at Dec 31 = $131,000
Less Allowance for uncollectible debts total = -$3,450
Balance Account receivables = $127,550
Explanation:
LaFond Company
Bad debt expense are combination of both doubtful and uncollectible debts within a financial year.
A debt becomes doubtful based on previous trends around debt collections. From the question for example 0 - 30days aged debt is doubtful of 1% uncollectibility, and 31 - 60 days aged debt is 2% etc.
A debt is written off as bad if it is adjudged to be uncollectible.
