Q1) Arias Company uses aging approach to evaluate bad debt expense. Balance of each account receivable is aged on basis of three time periods as follows: (1) not yet due $60,000, (2) up to 180 days past due $12,000, and (3) more than 180 days past due $4000. Experience has shown that for each age group average loss rate on the amount of receivables at year end due to non collectability is (1) 3 percent, (2) 15 percent and (3) 35 percent. At December 31, 2011(end of the current year) Allowance for Doubtful Accounts balance was $200 (credit) before end of period adjusting entry is made.
1) Create the suitable bad debt expense adjusting entry for year 2011.
2) Illustrate how different accounts related to accounts receivable muts be shown on December 31, 2011 balance sheet.