Chiller Company has credit sales of $5.60 million for year 2013.Chiller estimates that 1.32% of the credit sales will not be collected.Historically,4% of outstanding accounts receivable is uncollectible.On December 31,2013,the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $3,561.Chiller prepares a schedule of its December 31,2013,accounts receivable by age.Based on past experience,it estimates the percent of receivables in each age category that will become uncollectible.This information is summarized here:
$\begin{array}{ccc}
\text { December } 31,2013 & \text { Age of Accounts } & \text { Expected Percent } \
\text { Accounts Receivable } & \text { Receivable } & \text { Uncollectible } \
1,095,000 & \text { Not yet due } & 0.85 \% \
322,550 & 1 \text { to } 30 \text { days past due } & 1.42 \
84,700 & 31 \text { to } 60 \text { days past due } & 7.60 \
50,420 & 61 \text { to } 90 \text { days past due } & 42.50 \
12,500 & \text { Over } 90 \text { days past due } & 81.00
\end{array}$
Assuming the company uses the percent of sales method,what is the amount that Chiller will enter as the Bad Debt Expense in the December 31 adjusting journal entry?

Question

Chiller Company has credit sales of $5.60 million for year 2013.Chiller estimates that 1.32% of the credit sales will not be collected.Historically,4% of outstanding accounts receivable is uncollectible.On December 31,2013,the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $3,561.Chiller prepares a schedule of its December 31,2013,accounts receivable by age.Based on past experience,it estimates the percent of receivables in each age category that will become uncollectible.This information is summarized here:
$\begin{array}{ccc}
\text { December } 31,2013 & \text { Age of Accounts } & \text { Expected Percent } \
\text { Accounts Receivable } & \text { Receivable } & \text { Uncollectible } \
 1,095,000 & \text { Not yet due } & 0.85 \% \
322,550 & 1 \text { to } 30 \text { days past due } & 1.42 \
84,700 & 31 \text { to } 60 \text { days past due } & 7.60 \
 50,420 & 61 \text { to } 90 \text { days past due } & 42.50 \
 12,500 & \text { Over } 90 \text { days past due } & 81.00
\end{array}$
Assuming the company uses the percent of sales method,what is the amount that Chiller will enter as the Bad Debt Expense in the December 31 adjusting journal entry?

Quizplus · Accepted Answer

The percent of sales method calculates Bad Debt Expense as a percentage of credit sales. Here, 1.32% of $5.60 million credit sales is uncollectible, resulting in a Bad Debt Expense of $73,920.00.

Chiller Company Has Credit Sales of $5 Assuming the Company Uses the Percent of Sales Method,what Is