A firm uses the aging method to estimate bad debts. Immediately before recording

Question

A firm uses the aging method to estimate bad debts. Immediately before recording its adjusting entries, the firm wrote off $5,000 of accounts receivable, leaving a $600 credit balance in its allowance for doubtful accounts. The following is the aging schedule prepared after the write-offs:
Category Amount Estimated % uncollectible
Not past due $40,000 2%
1-45 days past due 30,000 6%
Beyond 45 days past due 10,000 20%

After recording bad debts expense, what is the final balance in the allowance for doubtful accounts?

Explanation / Answer

A firm uses the aging method to estimate bad debts. Immediately before recording its adjusting entries, the firm wrote off $5,000 of accounts receivable, leaving a $600 credit balance in its allowance for doubtful accounts. The following is the aging schedule prepared after the write-offs: Category Amount Estimated % uncollectible Not past due $40,000 2% 1-45 days past due 30,000 6% Beyond 45 days past due 10,000 20% Answer: $4600

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