Question

At year-end, chief company has a balance of $10,000 in accounts receivable of which $1,000 is more than 30 days overdue. Chief has a credit balance of $100 in the allowance for doubtful accounts before any year-end adjustments. Using the aging of accounts receivable method, chief estimates that 1% of current accounts and 10% of accounts over thirty days are uncollectible. What is the amount of bad debt expense? $100. $90. $190. $290.

Answer 1

Answer:

$9000*0.01=$90,1000*0.10 = $100,Dr. bad debt expense…..$90,Cr.

Allowances for bad debts..$90.Allowance for doubtful accounts desired balance:  ($1,000 × .10) + ($9,000 × .01).

= $190 .Allowance for doubtful accounts desired balance ($190) - Allowance for doubtfulaccounts current balance ($100) = Bad debt expense ($90).

So, correct Answer: $90 is the correct amount of bad debt.