Question

Tatu Corp. makes all sales on credit. During May 2016, total credit sales were $2,650,000, collections were $2,400,000 and accounts written off as uncollectible were $25,000. The balance in the allowance for bad debt accounts was $3,000 credit on May 1, 2016 Tatu Corp. has a $40.000 balance in accounts receivable on May 31, 2016. An analysis of individual accounts and prior loss experience reveals the following data for aging accounts receivable: Due within 30 days Amount $20,000 $10,000 $10,000 Percent 1% 10% Past due 30-90 days Past due more than 90 days 30% Calculate the Bad Debt Expense for May 2016 assuming Tatu Corp. uses the aging of accounts method A. $4,200 B. $26,200 C. $23.800 D. $25,000
with solution please

Answer 1

			Amount	Percent	Allowance required
			a	b	a*b
Due within 10 days			20000	1%	200
Past due 30-90 days			10000	10%	1000
Past due more than 90 days			10000	30%	3000
Total					4200
Allowance for baddebt as on May 31,2016=Allowance for baddebt as on May 1,2016-Accounts written off as uncollectible=3000-25000=-22000=$ 22000 debit
Required balance in allowance for baddebt=$ 4200 credit
Baddebt expense=Allowance for baddebt as on May 31,2016+Required balance in allowance for baddebt=22000+4200=$ 26200
Answer is
B. $26200