80.2K

Verified Solution

Link Copied!

I need the bad debt expense numbers that would reflect the Allowance for Doubtful Accounts to have an adjusted balance of $8,000. I also need the actual and accurate bad debt expense numbers. (please include formula/how you got to those numbers)

You are the accountant for London Imports and Exports. The company imports and exports food and candy items throughout the world. The company is finalizing its 3d quarter financial results. All adjustments have been made for the 3rd quarter except the adjustment for Bad Debts Expense. The preliminary 3rd quarter results along with the 1st and 2nd quarter results are shown below London Imports and Exports Quarterly Income Statements (amounts in thousands of U.S. dollars) (preliminary) (as re Net Sales Cost of Goods Sold Gross Profit Selling, General, & Admin. Expenses Bad Debts Expense Income Before Income Tax Income Tax Expense Net Income $135,800 (58,400) $77,400 56,560 S135,460 (58,250) S77,210 53,975 (6,050) 17,185 (5,155) S12,030 S130,100 (55,990) $74,110 53,690 (4,200) 16,220 (5,020) $11,200 20,840 (5,620) $15,220 The CFO asked you to look at the Allowance for Doubtful Accounts and use the Aged Accounts Receivable to calculate the adjustment needed for bad debts expense for the 3rd quarter. The CFO stated that he knows the customers are slower at paying this quarter but he wants the Allowance for Doubtful Accounts to not be increased; in fact he's encouraging you to decrease it so it has an adjusted balance of $8,000. He wants you to play around with the estimated bad debt loss rates to get the number he wants for the adjusted balance of the Allowance account. You are confused, so you decide to analyze the Allowance for Doubtful Accounts, and you came up with the following summary of the T account below: Allowance for Doubtful Accounts 7900 4110 4200 7990 4120 6050 9920 Jan. 1 Balance Forward 1 Write Offs 2 Write Offs 3 Write Offs 1 Bad Debts Estimate March 31 Adjusted 2 Bad Debts Estimate June 30 Adjusted 4030 5890 September 30 Unadjusted

Answer & Explanation Solved by verified expert

See Answer