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11 February, 04:41

Crimson Inc. recorded credit sales of $779,000, of which $560,000 is not yet due, $120,000 is past due for up to 180 days, and $99,000 is past due for more than 180 days. Under the aging of receivables method, Crimson Inc. expects it will not collect 1% of the amount not yet due, 16% of the amount past due for up to 180 days, and 20% of the amount past due for more than 180 days. The allowance account had a debit balance of $2,600 before adjustment. After adjusting for bad debt expense, what is the ending balance of the allowance account?

a. $60,240

b. $77,040

c. $73,140

d. $28,500

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  1. 11 February, 06:53
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    Answer: $47,200

    Explanation:

    Accounts receivable not yet due = $560,000

    Bad Debts for accounts receivable not yet due:

    = $560,000 * 0.01

    = $5,600.

    Accounts receivable due for up-to 180 days = $120,000

    Bad Debts for accounts receivable due for up-to 180 days:

    = $120,000 * 0.16

    = $19,200.

    Accounts receivable due for more than 180 days = $99,000

    Bad Debts for accounts receivable due for more than 180 days:

    = $99,000 * 0.20

    = $19,800

    Ending balance of Allowance account:

    = Debit Balance of allowance account + $5,600 + $19,200 + $19,800

    = $2,600 + $5,600 + $19,200 + $19,800

    = $47,200
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