The trial balance of Stardust Company at the end of 2006 fiscal year included the following account balances
Week 5 E7-8 Stardust Company
Estimating Bad Debt
The trial balance of Stardust Company at the end of 2006 fiscal year included the following account balances:
Account
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Accounts receivable……………………………………. $48,900
Allowance for bad debts………………………………… 2,500 (debit balance)
The company has not yet recorded any bad debt expense for 2006. Determine the bad debt expense to be recognized by Stardust Company for 2006, assuming the following independent situations:
1. An aging accounts receivable analysis indicates that probable uncollectible accounts receivable at year-end amount to $4,500.
2. Company policy is to maintain a provision for uncollectible accounts receivable equal to 3% of outstanding accounts receivable.
3. Company policy is to estimate uncollectible accounts receivable equal to 0.5% of the previous year’s annual sales, which were $200,000.
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