Question

1. The following items appeared on the Balance Sheet of Bellaire Inc. on 31 December 2020.

All amounts in $	2020	2019
Trade Receivables (Gross)	880,100	765,000
Allowance for Doubtful Debts	(?)	(52,800)
Net Trade Receivables	?	827,300

In addition, the Ageing analysis for the company was as follows:

Age	Trade Rec.	Default rate
0-30 days	510,000	2%
31-60 days	205,000	6%
61-90 days	120,000	15%
90+ days	45,100	50%

Using the above information, compute the Allowance for Doubtful Debts and the Net Trade Receivables for the company for 31.12.2020. Assuming the company recorded $35,000 of write-offs during 2020, what was the amount of bad debt expense that must have been recorded during 2020? Please show your calculations to receive partial credit. [easy 10 points]

Answer 1

Estimated ending allowance for doubtful accounts

Age	Trade rec	Default rate	$ uncollectible
0-30 days	510000	2%	10200
31-60 days	205000	6%	12300
61-90 days	120000	15%	18000
90+ days	45100	50%	22550
Total			63050

Allowance for doubtful account after write off = 52800-35000 = 17800

Bad debt expense = 63050-17800 = 45250