Richards company uses the allowance method of accounting, Ask an Expert

Accounting

Richards Company uses the allowance method of accounting for bad debts. The following summary schedule was prepared from an aging of accounts receivable outstanding on December 31 of the current year.

No. of Days Probability
Outstanding Amount of Collection
0-30 days $500,000 .98
31-60 days 200,000 .90
Over 60 days 100,000 .80
The following additional information is available for the current year:
Net credit sales for the year $4,000,000
Allowance for Doubtful Accounts:
Balance, January 1 45,000 (Cr)
Balance before adjustment, December 31 2,000 (Dr)

If Richards bases its estimate of bad debts on the aging of accounts receivable, doubtful accounts expense for the current year ending December 31 is

a. $47,000.
b. $48,000.
c. $50,000.
d. $52,000.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9975489

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