Question

At December 31, 2019, Bedford Company had a balance of $248,100 in its Accounts Receivable account and a credit balance of $900 in its Allowance for Doubtful Accounts account. Bedford analyzed and aged its accounts receivable based on the following estimated uncollectible amounts:

Age of Accounts	Receivables Balance	Estimated % Uncollectible
Current	$ 130,500	0.6%
31 to 60 day	66,300	2.0%
61 to 90 days	26,700	5.5%
Over 91 days	24,600	21.0%
Total	$248,100

The company bases its provision for credit losses on the aging analysis.

Required:

1. What amount of bad debt expense will Bedford report in its 2019 income statement? (Round to nearest whole dollar amount.)
2. How would Accounts Receivable and the Allowance for Doubtful Accounts appear in its December 31, 2019, balance sheet?  

Answer 1

Answer 1)

Calculation of amount of bad debts for the year 2019

Amount of bad debts = Estimated amount of uncollectible – Opening balance of bad debts

                                        = $ 8,743.50 - $ 900

                                        = $ 7,843.50 or $ 7,844 (rounded off).

Therefore the amount of bad debts expense for the year 2019 is $ 7,844.

Working Note:

Calculation of Estimated amount of Uncollectible accounts:

Age of Accounts	Receivables Balance	Estimated % Uncollectible	Estimated amount of Uncollectible
Current	$130,500	0.60%	$783.00
31 to 60 days	$66,300	2.00%	$1,326.00
61 to 90 days	$26,700	5.50%	$1,468.50
Over 91 days	$24,600	21.00%	$5,166.00
Total	$248,100		$8,743.50

Answer 2)

Balance Sheet

Assets	Amount (in $)	Amount (in $)
Current Assets:
Accounts receivable	$248,100
Less: Allowance for doubtful debts	$8,744
Net Accounts receivable		$239,356