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Computing and Recording Bad Debt Expense

Need help with the problem attached.

During 2006, Wishbone Corporation had a total of $5,000,000 in sales, of which 80% were
on credit. At year-end, the Accounts Receivable balance showed a total of $2,300,000, which
had been aged as follows:

Age Amount
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,900,000
1-30 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
31-60 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
61-90 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,000
Over 90 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
$2,300,000
Prepare the journal entry required at year-end to record the bad debt expense under each
of the following independent conditions. Assume, where applicable, that Allowance for Bad
Debts had a credit balance of $5,500 immediately before these adjustments.

Required:
1. Use the direct write-off method. (Assume that $60,000 of accounts are determined to be
uncollectible and are written off in a single year-end entry.)
2. Based on experience, uncollectible accounts existing at year-end are estimated to be 3% of
total accounts receivable.
3. Based on experience, uncollectible accounts are estimated to be the sum of:
1% of current accounts receivable
6% of accounts 1-30 days past due
10% of accounts 31-60 days past due
20% of accounts 61-90 days past due
30% of accounts over 90 days past due

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Computing and Recording Bad Debt Expense
During 2006, Wishbone Corporation had a total of $5,000,000 in sales, of which 80% were
on credit. At year-end, the Accounts Receivable balance showed a total of $2,300,000, which
had been aged as follows:

Age Amount
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,900,000
1-30 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
31-60 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
61-90 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...

Solution Summary

The solution explains how to calculate the record bad debt expense.

$2.19