Question

the following information pertains to Lightning Inc., at the end of December: Credit Sales $ 60,000 Accounts Payable 10,000 Accounts Receivable 7,000 Allowance for Uncollectible Accounts 400 credit Cash Sales 20,000 Lightning uses the aging method and estimates it will not collect 2% of accounts receivable not yet due, 10% of receivables up to 30 days past due, and 40% of receivables greater than 30 days past due. The accounts receivable balance of $7,000 consists of $3,500 not yet due, $2,000 up to 30 days past due, and $1,500 greater than 30 days past due. What is the appropriate amount of Bad Debt Expense

Answer 1

Answer:the appropriate amount of Bad Debt Expense=$870

Explanation:

Given that for Lightning Inc., at the end of December:  

Credit Sales $60,000

Accounts Payable 10.000

Accounts Receivable 7.000

Allowance for Uncollectible Accounts 400

creditCash Sales 20,000  

Using the  aging method and estimates it states that the following would be uncollectible

1. 2% of accounts receivable not yet due, $3500   which is

2 %  x 3500= $70

2. 10% of receivables less than 30 days past due, $2000 which is

  10% x 2000=$200

3. 40% of receivables greater than 30 days past due,$1500 which is

40% x$1500=$600

Appropriate amount of Bad Debt Expense= Allowance for Uncollectible Accounts =$70+$200+$600==$870

Therefore, Bad debt expense =$870  

Allowance for Uncollectible Accounts=$870

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