Muskrat Mittens extends credit terms to its customers that require that customers pay in 60 days

Subject:AccountingPrice:2.86 Bought11

Share With

Muskrat Mittens extends credit terms to its customers that require that customers pay in 60 days. Muskrat Mittens reported gross receivables and potential losses in its accounts receivable as at December 31, 2018 as follows:

Age

Gross Receivable balance

Percentage expected to be uncollectible

Current

$35,000

5%

1−30 days past due

$8,000

30%

31−60 days past due

$5,000

50%

61+ days past due

$2,000

70%

Muskrat Mittens had a balance in Accounts Receivable on January 1, 2018 of $48,000 and a balance in the Allowance for Uncollectible Accounts on January 1, 2018 of $8,500. Credit sales during the year were $125,000 and cash collections from accounts receivables were $120,000 during the year. Determine the amount of bad debt expense for 2018.

1)   What was the amount of Accounts Receivables written off during 2018? (3 points)

Answer: $3,000 

Write-offs during the year = Beginning AR 48,000 + Credit sales $125,000 - Cash Collections $120,000 - Write-offs = Ending AR 50,000, so write-offs = $3,000