Questions: A company recorded credit sales of 773,000, of which 580,000 is not yet due, 130,000 is past due for up to 180 days, and 63,000 is past due for more than 180 days. Under the aging of receivables method, the company expects it will not collect 1% of the amount not yet due, 14% of the amount past due for up to 180 days, and 23% of the amount past due for more than 180 days. The allowance account had a debit balance of 4,800 before adjustment. After adjusting for bad debt expense, what is the ending balance of the allowance account? Multiple Choice 5,800 38,490 43,290 39.590

Solution Steps

To solve this problem, we need to calculate the expected uncollectible amounts for each category of receivables and then adjust the allowance account accordingly. Here are the steps:

1. Calculate the expected uncollectible amount for each category:

   • Not yet due: 1% of $580,000
   • Past due up to 180 days: 14% of $130,000
   • Past due more than 180 days: 23% of $63,000

2. Sum these expected uncollectible amounts to get the total expected uncollectible amount.

3. Adjust the allowance account by adding the total expected uncollectible amount to the existing debit balance of $4,800.

We calculate the expected uncollectible amounts for each category of receivables:

1. For the amount not yet due: \[ \text{Uncollectible}_{\text{not yet due}} = 580000 \times 0.01 = 5800 \]

2. For the amount past due for up to 180 days: \[ \text{Uncollectible}_{\text{past due 180}} = 130000 \times 0.14 = 18200 \]

3. For the amount past due for more than 180 days: \[ \text{Uncollectible}_{\text{past due 180+}} = 63000 \times 0.23 = 14490 \]

Next, we sum the expected uncollectible amounts: \[ \text{Total Expected Uncollectible} = 5800 + 18200 + 14490 = 38490 \]

We adjust the allowance account by adding the total expected uncollectible amount to the existing debit balance of $4800: \[ \text{Ending Allowance Balance} = 38490 + 4800 = 43290 \]

Final Answer