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Domino Company uses the aging of accounts receivable method to estimate uncollectible accounts expense. Domino began Year 2 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $44,010 and $3,440, respectively. During the year, the company wrote off $2,620 in uncollectible accounts. In preparation for the company's Year 2 estimate, Domino prepared the following aging schedule: Number of days Receivables % Likely to be past due amount uncollectible Current $ 70,000 1% 0-30 26,700 5% 31-60 6,760 10% 61-90 3,420 25% Over 90 3,100 50% Total $ 109,980 What will Domino record as Uncollectible Accounts Expense for Year 2

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Answer:

Domino will record $4,296 as Uncollectible Accounts Expense for Year 2.

Explanation:

The write-off of the accounts receivable is as follows:

Debit Allowance for doubtful accounts $2,620

Credit Accounts receivable $2,620

(Write-off of accounts receivable)

The effect of the write-off on the allowance account is $3,440 - $2,620 = $820 (credit). It was assumed that the opening balance of $3,440 is credit balance.

Estimate of the uncollectible amount

No of days    Receivables % Past due   Amount uncollectible

Current         $ 70,000             1%                             $700

0-30                 26,700             5%                            1,335

31-60                  6,760            10%                              676

61-90                  3,420            25%                             855

Over 90              3,100            50%                           1,550

Total            $109,980                                              $5,116

The bad debt expense will be $5,116 - $820 = $4,296.

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