Gary\'s Dairy uses the aging approach to estimate bad debt expense. The balance

Question

Gary's Dairy uses the aging approach to estimate bad debt expense. The balance of each account receivable is aged on the basis of three time periods as follows: not yet due, $16,000, up to 120 days past due, $5.500, and more than 120 days past due, $2,500. Experience has shown that for each age group, the average loss rate on the amount of the receivables at year-end due to uncollectablity is 2 percent, 14 percent, and 35 percent, respectively. At December 31, 2011 (end of the current year), the Allowance for Doubtful Accounts balance is $900 (credit) before the end-of- period adjusting entry is made. Required: What amount should be recorded as Bad Debt Expense for the current year? (Omit the "$" sign in your response.)

Explanation / Answer

Bad debt expense for the current year = $1965

Age category Amount percentage not collectible uncollectible amount not yet due $ 16,000.00 2% $   320.00 upto 120 days past due $   5,500.00 14% $   770.00 more than 120 days past due $   2,500.00 35% $   875.00 Bad debt expense $   1,965.00

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