Heller corporation has aged its accounts receivable and estimated uncollectible accounts as follows (in thousands). age of receivables current 30-60 days past due 61-90 days past due a/r balance estimated % uncollectible $11,000 2,400 1,700 19% 3% 6% what bad debt expense should the company report for the current period?

Current                      $11,000  19%  $2,090  

Past Due 30-60 days  $2,400  3%  $72  

Past due 61-90  days  $1,700  6%  $102  

                                            $2,264  

Dr Bad Debt Expense$ 2.264

Cr Allowance for Uncollectible Accounts$ 2.264

Explanation:

If the company applies the allowance method, it means that the account Allowance for Uncollectible Accounts must show as balance the % estimated of accounts receivables as CREDIT, this case $2,264 by the aging method to estimate uncollectible accounts.

Bad accounts are those credits granted by the company and there is no possibility of being charged.

"When customers buy products on credits but the company cannot collect the debt, then it's necessary to cancel the unpaid invoice as uncollectible."

One way is to directly cancel bad debts at the time it was decided that the credit is bad, the total amount reported as bad debt expenses negatively affect the income statement and the accounts receivable are reduced by the same amount, less assets .

The other way is to determine a percentage of the total amount of accounts receivable as bad debts, there are many ways to analyze accounts receivable and calculate the value of bad debts.

When the company has the percentage of uncollectible accounts, the required journal entry is Bad Expenses (debit) with Allowance for Uncollectible Accounts (credit)

At the time of cancellation, since the expenses were recognized before, we only use the Allowance for Uncollectible Accounts (Debit)  with accounts receivable (credit), with this we are recognizing the bad credit of the company.

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