Hui Corporation The data below is for Hui Corporation for 2014.
Refer to the data for Hui Corporation.
If the aging approach is used to estimate bad debts,what should the balance in the Allowance for Doubtful Accounts be after the bad debts adjustment?

Question

Hui Corporation The data below is for Hui Corporation for 2014.
 Refer to the data for Hui Corporation.
If the aging approach is used to estimate bad debts,what should the balance in the Allowance for Doubtful Accounts be after the bad debts adjustment?

Quizplus · Accepted Answer

The aging method estimates the balance of the Allowance for Doubtful Accounts based on the age of the accounts receivable. Using the given data, the total accounts receivable balance is $550,000. Applying the aging percentages, we get the following breakdown:

0-30 days: $310,000 x 4% = $12,400
31-60 days: $100,000 x 10% = $10,000
61-90 days: $70,000 x 20% = $14,000
Over 90 days: $70,000 x 50% = $35,000

Total estimated balance of Allowance for Doubtful Accounts = $12,400 + $10,000 + $14,000 + $35,000 = $71,400

Since the Allowance for Doubtful Accounts currently has a balance of $58,200, the bad debt adjustment should be $71,400 - $58,200 = $13,200. Therefore, the answer is C.

Hui Corporation the Data Below Is for Hui Corporation for 2014