Sorenstam Company uses the aging method to estimate bad debts. The allowance for doubtful accounts has a credit balance of $1,700 before write-offs and adjustments. Immediately before recording its adjusting entries, Sorenstam writes off $5,000 of accounts receivable. The following is the aging chedule prepared on december 31, 2011 after write-offs.
Not past due....... $140,000 ....... 2% uncollectible
1-45 days .......... $30,000 ........ 6% uncollectible
Beyond 45 days past due.... $10,000 ...... 20% uncollectible
A) After recording bad debt expense, what is the final balance in the allowance for doubtful accounts at December 31, 2011?
B) What effect will bad debts have on Sorenstam's reported net income for the period ended December 31, 2011? You may ignore income tax effects.
C) At what amount should the receivables be reported on the balance sheet at December 31, 2011?