Question

Grana Inc. uses the Aging of Accounts Receivable method for estimating uncollectible accounts. The accounting records show the following information at the end of the year:

	Number of Days Unpaid
	0 - 30	31 - 60	61 - 90	Over 90
Accounts Receivable	$370,000	$240,000	$110,000	$80,000
Estimated % Uncollectible	10%	15%	25%	5%

If the unadjusted credit balance in the Allowance for Doubtful Accounts account before is $15,000, what would be the amount of the adjustment for bad debts?

$45,000

$64,000

$34,500

$79,000

Answer 1

• All working forms part of the answer

		Number of Days Unpaid
		0 - 30	31 - 60	61 - 90	Over 90	TOTAL
A	Accounts Receivable	$          370,000.00	$        240,000.00	$        110,000.00	$          80,000.00	$          800,000.00
B	Estimated % Uncollectible	10%	15%	25%	5%
C = A x B	Estimated uncollectible amount	$            37,000.00	$           36,000.00	$           27,500.00	$             4,000.00	$          104,500.00

• Adjusted value of Allowance account must be equal to $ 104,500

A	Estimated uncollectible amount	$          104,500.00
B	Unadjusted balance in Allowance account	$            15,000.00
C = A - B	Answer: Amount of Bad Debt expense adjustment	$            89,500.00

• Correct answer is $ 89,500 [But is not one of the 4 options made available by you.]