Barry Waterhouse uses the aging of Accounts Receivable balance sheet approach to estimate uncollectibles. Not yet due accounts are $470,000, with an estimated uncollectible percentage of 1.5%. 1-30 days past due accounts are $100,000, with an estimated uncollectible percentage of 3%. Over 30 days past due accounts are $3,900 with an estimated uncollectible percentage of 10%. If the company has a debit balance in Allowance for Doubtful Accounts of $950, what is the bad debts expense adjusting entry amount? (Round any intermediate calculations and your final answer to the nearest dollar.)
A) $10,440
B) $11,390
C) $9,490
D) $2,440

Question

Quizplus · Accepted Answer

First, calculate the estimated uncollectible amount for each category:- Not yet due: $470,000 * 1.5% = $7,050- 1-30 days past due: $100,000 * 3% = $3,000- Over 30 days past due: $3,900 * 10% = $390Total estimated uncollectibles = $7,050 + $3,000 + $390 = $10,440Since there's already a debit balance of $950 in the Allowance for Doubtful Accounts, the adjusting entry to record the bad debts expense needs to increase the allowance to the calculated total of $10,440. Therefore, the bad debts expense = $10,440 (desired allowance balance) - $950 (existing debit balance) = $11,390.

Barry Waterhouse Uses the Aging of Accounts Receivable Balance Sheet