Question

Trump Agency separates its accounts receivable into three age groups for purposes of estimating the percentage ofuncollectible accounts.L Accounts not yet due = $25,000; estimated uncollectible = 4%.2 Accounts 1-60 days past due = $10,000; estimated uncollectible = 25%.3. Accounts more than 60 days past due = $5,000; estimated uncollectible = 50%.In addition, the balance of Allowance for Uncollectible Accounts before adjustment is $1,000 (credit). Compute the totalestimated uncollectible accounts and record the year-end adjustment.

Answer 1

Total estimated uncollectible accounts: $5,000

The year-end adjustment entry:

Debit Bad Debts expense: $5,000

Credit Allowance for Uncollectible Accounts: $5,000

Step-by-step explanation:

Estimated uncollectible = $25,000 x 4% + $10,000 x 25% + $5,000 x 50% = $1,000 + $2,500 + $2,500 = $6,000

Before adjustment, the balance of Allowance for Uncollectible Accounts is $1,000 (credit), therefore, Estimated uncollectible Accounts recorded for Bad Debts expense is: $6,000 - $1,000 = $5,000

The entry year-end adjustment:

Debit Bad Debts expense: $5,000

Credit Allowance for Uncollectible Accounts: $5,000