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On December 31, 2018, Andy Inc has a debit balance of $1500 for the allowance for uncollectible accounts before any year-end adjustments. Andy Inc. also has the following information for its account receivable and estimated percentages for bad debts for different past due amounts: Age group (days past due) Accounts receivable Estimated Percent Uncollectible 0-30 $50,000 5% 31-60 $20,000 10% 61-90 $10,000 20% What is the amount of bad debt expense to be reported on Andy Inc's financial statements for 2018 using the aging method? a. S1.500 b. $8,000 c. $6.500 d. $5,000

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phamdiep1810

Answer:

The amount of bad debt expense to be reported on Andy Inc's financial statements for 2018 is b. $8,000

Explanation:

Estimated amount for bad debts = 5% x $50,000 + 10% x $20,000 + 20% x $10,000 = $2,500 + $2,000 + $2000 = $6,500

Andy Inc's use the aging method to estimate bad debts and has a debit balance of $1500 for the allowance for uncollectible accounts before any year-end adjustments. Therefore,

Bad debt expense = $6,500 + $1,500 = $8,000

The journal entry:

Debit Bad debt expense $8,000

Credit Allowance for uncollectible accounts $8,000

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