Question

Crimson Inc. recorded credit sales of $881,000, of which $590,000 is not yet due, $200,000 is past due for up to 180 days, and $91,000 is past due for more than 180 days. Under the aging of receivables method, Crimson Inc. expects it will not collect 5% of the amount not yet due, 18% of the amount past due for up to 180 days, and 22% of the amount past due for more than 180 days. The allowance account had a debit balance of $4,400 before adjustment. After adjusting for bad debt expense, what is the ending balance of the allowance account? Multiple Choice O $98,620 O $89.920 О $85,520. $29,500. O

Answer 1

1) Required ending balance of allowance account = ($590,000*5%) +($200,000*18%) + (91,000*22%) Required ending balance of allowance account = $29,500 + $36,000 + $20,020 Required ending balance of allowance account = $85,520 Hence, the correct option is $85,520. 2) Interest revenue accrued = $8,000*2%*5/12 Interest revenue accrued = $67 Credit Debit $ 67 Account Titles and Explanation Interest receivable Interest revenue (To record the interest revenue accrued) $ 67 Hence, the correct option is Option D. 3) Bad debts expense = $400,000*2.5% Bad debts expense = $10,000 Credit Debit $ 10,000 Account Titles and Explanation Bad debts expense Allowance for uncollectible accounts (To record the bad debts expense) $ 10,000 Hence, the correct option is: Debit to Bad Debt Expense for $10,000.