Question

Below is the "totals" section of XYZ Corporation’s full ageing schedule. XYZ will be using this information to estimate uncollectible accounts receivable at year-end.Number of Days Outstanding

Total 0-30 31-60 61-90 91-120 Over 120
Accounts receivable $ 375,000 $ 220,000 $ 90,000 $ 30,000 $ 20,000 $ 15,000
% uncollectible 1% 4% 5% 9% 20%
Estimate bad debts
- The company subsequently collects $700 on a specific account that had previously been determined to be uncollectible in (d). Prepare the journal entry(ies) necessary to restore the account and record the cash collection.

Answer 1

The student's question involves calculating bad debts by applying percentages of uncollectibility to accounts receivable balances and preparing journal entries for the recovery of a previously uncollectible account.

Step-by-step explanation:

The student is asking for help with estimating uncollectible accounts receivable and writing the necessary journal entries to restore an account and record a cash collection after the recovery of a previously determined uncollectible account.

To estimate bad debts, XYZ Corporation will multiply the outstanding accounts receivable balances by the respective uncollectible percentages. As for the journal entry after collecting on a previously uncollectible account, two entries are needed. The first entry would debit Accounts Receivable and credit Allowance for Doubtful Accounts to restore the receivable balance. The second entry to record the cash collection would debit Cash and credit Accounts Receivable.

Here is an example of the journal entries:

1: Accounts Receivable ... $700 (Debit)
Allowance for Doubtful Accounts ... $700 (Credit)

2: Cash ... $700 (Debit)
Accounts Receivable ... $700 (Credit)