Question

Arundel Company uses aging to estimate uncollectibles. At the end of the fiscal year, December 31, 2018, Accounts Receivable has a balance that consists of: Dollar Value Age of Account Estimated Collectible $230,000 < 30 days old 99.0% 75,000 30 to 60 days old 94.0% 30,000 61 to 120 days old 71.0% 15,000 > 120 days old 17.0% The current unadjusted Allowance for Uncollectible Accounts balance is a debit balance of $2,000 and the Bad Debt Expense accounts has an unadjusted balance of zero. After the adjusting entry is made, what will be the dollar balances in the Allowance for Doubtful Accounts? Round to nearest whole dollar.

Answer 1

$29,950

Step-by-step explanation:

For computing the balance in the Allowance for Doubtful Accounts, first we have to determine the total estimated uncollectible accounts which is shown below:

= Dollar value × uncollectible percentage + Dollar value × uncollectible percentage + Dollar value × uncollectible percentage + Dollar value × uncollectible percentage

= $230,000 × 1% + $75,000 × 6% + $30,000 × 29% + $15,000 × 83%

= $2,300 + $4,500 + $8,700 + $12,450

= $27,950

And, the debit balance of uncollectible account is $2,000

So, the balance in allowance for doubtful accounts would be

= $27,950 + $2,000

= $29,950

Since the collectible percentage is given so we simply deduct it by 100%