Question

Aging Method On January 1, 2019, Smith, Inci, has the following balances for accounts receivabie and allowance for doubtrul accounts. vuring 2019, Smith had $2,860,000 of credat sales, collected 52,005,000 of accounts recelvable, and wrote off $3,850 of accounts recelvable as uncollectibi At year end, Smith performs an aging of its accounts receivabie balance and estimotes that 53,800 will be uncollectible.

Required:
1. Colcuilate Smith's preadjustment baiance in accounts receivable on December 31,2019 . 2. Caiculate Smathis preadjustment batance in allowance for doubdal accounits on December 31, 2019

Answer 1

The preadjustment accounts receivable for Smith, Inc. are calculated by adjusting the beginning balance for credit sales, collections, and write-offs. The preadjustment allowance for doubtful accounts is adjusted from its beginning balance by accounting for write-offs and the new estimate of uncollectible accounts.

Step-by-step explanation:

The student has asked to calculate the preadjustment balances in accounts receivable and allowance for doubtful accounts for Smith, Inc. on December 31, 2019. To calculate the preadjustment balance in accounts receivable, we start with the beginning balance and adjust it for the credit sales made during the year and the collections received from customers:

• Begin Balance + Credit Sales - Collections - Write-offs = End Pre-Adjust. Balance

The calculation of allowance for doubtful accounts would start from the beginning balance, considering the write-offs during the year and the new estimate of uncollectible accounts:

• Begin Allowance Balance - Write-offs + New Estimate = End Pre-Adjust. Allowance

These calculations provide Smith, Inc. with the ending balances before any adjusting entries are made, offering insight into the expected level of bad debts.