Question 9 The Farr Company?s allowance for doubtful accounts has a balance of $

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Question 9 The Farr Company?s allowance for doubtful accounts has a balance of $74,500 cr. at January 1, 20x5. The following transactions occurred during the year 20x5: Mark 000 out of Accounts written off $66,000 Recoveries of previously written off accounts 8,400 Flag question Accounts receivable at December 31, 20x5 - 0-30 days $1,150,000 30-59 days 465,000 60-89 days 125,000 Over 90 days 56,000 The Farr Company controller estimated that 1 % of all accounts in the 0-30 day category will become uncollectible, 5% of accounts in the 30-59 day category, 25% of accounts in the 60-89 day category and 50% of accounts greater than 90 days. What is the bad debt expense for the year ended December 31, 20x5? Select one: $19,500 X $38,100 $77,100 $57,600 Check The correct answer is: $77,100

Explanation / Answer

during the year following entries were made

Now lets see the balance in allowance for doubtful debts = opeing $74,500 - written off $66,000 + recovery $8400 = $16,900

Now we have credit balance in the allowance account $16,900

estimated bad debts is $94,000 so me need to make entry for $94,000 - $16,900 = $77,100

Days Accounts recievable % Estimated bad debts 0-30 $1,150,000 1% $11,500 30-59      465,000 5%    23,250 60-89      125,000 25% 31,250 over 90       56,000 50%    28,000 Total $94,000

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