Chiller Company has credit sales of $5.90 million for year 2010. Chiller estimat
ID: 2488659 • Letter: C
Question
Chiller Company has credit sales of $5.90 million for year 2010. Chiller estimates that 1.47% of the credit sales will not be collected. Historically, 4.15% of outstanding accounts receivable is uncollectible. On December 31, 2010, the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $3,564. Chiller prepares a schedule of its December 31, 2010, accounts receivable by age. Based on past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here:
Assuming the company uses the percent of accounts receivable method, what is the amount that Chiller will enter as the Bad Debt Expense in the December 31 adjusting journal entry?
$83,166.00
$68,793.70
$46,079.11
$61,665.70
$42,515.11
December 31, 2010Accounts Receivable Age of Accounts
Receivable Expected Percent
Uncollectible $1,098,000 Not yet due 0.235% 325,550 1 to 30 days past due 1.57 85,000 31 to 60 days past due 7.75 50,720 61 to 90 days past due 42.65 12,530 Over 90 days past due 81.15
Explanation / Answer
Age of Accounts of Receivables
Amount
% of Uncollectable
Amount
Not yet due
1,098,000.00
0.24
2,580.30
1 to 30 days past due
325,550.00
1.57
5,111.14
31 to 60 days past due
85,000.00
7.75
6,587.50
61 to 90 days past due
50,720.00
42.65
21,632.08
Over 90 days past due
12,530.00
81.15
10,168.10
46,079.11
Less:
Unadjusted Allowance for Doubtful debts Credit Balance
(3,564.00)
Baddebt Expense
42,515.11
Option 4 Correct
Age of Accounts of Receivables
Amount
% of Uncollectable
Amount
Not yet due
1,098,000.00
0.24
2,580.30
1 to 30 days past due
325,550.00
1.57
5,111.14
31 to 60 days past due
85,000.00
7.75
6,587.50
61 to 90 days past due
50,720.00
42.65
21,632.08
Over 90 days past due
12,530.00
81.15
10,168.10
46,079.11
Less:
Unadjusted Allowance for Doubtful debts Credit Balance
(3,564.00)
Baddebt Expense
42,515.11
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