The following information pertains to Lightning,Inc.at the end of December:
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

Quizplus · Accepted Answer

- For accounts receivable not yet due, Lightning estimates Bad Debt Expense of 2% which equals 0.02 x $3,500 = $70.
- For accounts receivable less than 30 days past due, Lightning estimates Bad Debt Expense of 10% which equals 0.10 x $2,000 = $200.
- For accounts receivable greater than 30 days past due, Lightning estimates Bad Debt Expense of 40% which equals 0.40 x $1,500 = $600.
- The total estimated Bad Debt Expense is $70 + $200 + $600 = $870. Therefore, the appropriate amount of Bad Debt Expense is $870.

The Following Information Pertains to Lightning,Inc