Crimson Inc. recorded credit sales of $780,000, of which $540,000 is not yet due
ID: 2461463 • Letter: C
Question
Crimson Inc. recorded credit sales of $780,000, of which $540,000 is not yet due, $170,000 is past due for up to 180 days, and $70,000 is past due for more than 180 days. Under the aging of receivables approach, Crimson Inc. expects it will not collect 5% of the amount not yet due, 20% of the amount past due for up to 180 days, and 27% of the amount past due for more than 180 days. The allowance account had a debit balance of $2,500 before adjustment. After adjusting for bad debt expense, what is the ending balance of the allowance account?
a)$27,000
b)$82,400
c)$83,000
d)$79,900
Explanation / Answer
5% of the amount not yet due :540,000*5%=27,000
20% of the amount past due for up to 180 days : 170,000*20%=34,000
27% of the amount past due for more than 180 days :70,000*27%=18,900
The allowance account debit balance :$2,500
Total = 82,400
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