The following information pertains to Lightning,Inc.at the end of December:
$$\begin{array} { l r }
\text { Credit Sales } & \$ 60,000 \
\text { Accounts Payable } & 10,000 \
\text { Accounts Receivable } & 7,000 \
\text { Allowance for Uncollectible Accounts } & \$ 400 \text { credit } \
\text { Cash Sales } & 20,000
\end{array}$$ Lightning uses the aging method and estimates it will not collect 2% of accounts receivable not yet due,10% of receivables less than 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 less than 30 days past due,and $1,500 greater than 30 days past due.What is the appropriate amount of Bad Debt Expense?

Question

The following information pertains to Lightning,Inc.at the end of December:
$$\begin{array} { l r } 
\text { Credit Sales } & \$ 60,000 \
\text { Accounts Payable } & 10,000 \
\text { Accounts Receivable } & 7,000 \
\text { Allowance for Uncollectible Accounts } & \$ 400 \text { credit } \
\text { Cash Sales } & 20,000
\end{array}$$ Lightning uses the aging method and estimates it will not collect 2% of accounts receivable not yet due,10% of receivables less than 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 less than 30 days past due,and $1,500 greater than 30 days past due.What is the appropriate amount of Bad Debt Expense?

Quizplus · Accepted Answer

The estimated uncollectible amounts are: $3,500 * 2% = $70, $2,000 * 10% = $200, and $1,500 * 40% = $600. Total estimated uncollectibles = $70 + $200 + $600 = $870. The allowance account already has a $400 credit balance, so the bad debt expense needed is $870 - $400 = $470.

The Following Information Pertains to Lightning,Inc Lightning Uses the Aging Method and Estimates It Will Not