Question

(Algo) Aging of receivables method LO P3

a. Complete the table below to calculate the estimated balance of Allowance for Doubtful Accounts using aging of accounts receivable
b. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $5,300 credit
c. Prepare the adjusting entry to record bad debts expense using the estimate from part a.
Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $1,800 debit Complete this question by entering your answers in the tabs below. (Algo) [The following information applies to the questions displayed below.) Daley Company prepared the following aging of receivables analysis at December 31. Days Past Due Accounts receivable Percent uncollectible Total $655,000 $413,000 3 1 to 30 $107.000 4% 31 to be S53.000 7% 61 to 90 $35,000 9 Over se $47.000 12% Exercise 7-14 (Algo) Percent of receivables method LO P3

a. Estimate the balance of the Allowance for Doubtful Accounts assuming the company uses or total counts receivable to estimate uncollectibles, instead of the aging of recewables method
b. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $13.700 credit
c. Prepare the adjusting entry to record bad debt5 expense using the citimate from part a Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $2.700 debit

Answer 1

The question pertains to the aging of accounts receivable and the calculation of the allowance for doubtful accounts, which is addressed by estimating uncollectibles for each age category, totaling them, and adjusting the allowance based on the existing balance, be it credit or debit.

Step-by-step explanation:

To answer the student's question regarding the aging of accounts receivable and the establishment of an allowance for doubtful accounts, let's proceed with the given details:

Existing Information for Aging of Receivables:

• Current: $413,000 at 3%
• 1 to 30 days past due: $107,000 at 4%
• 31 to 60 days past due: $53,000 at 7%
• 61 to 90 days past due: $35,000 at 9%
• Over 90 days past due: $47,000 at 12%

The

adjusting entries

for both credit and debit scenarios will be structured as follows:

1. Calculate the estimated uncollectibles for each age category.
2. Add these together for the total estimated uncollectibles amount.
3. Adjust the Allowance for Doubtful Accounts by the difference between the existing balance (either credit or debit) and the total estimated uncollectibles.

For case (b) with a $5,300 credit balance, if the total estimated uncollectibles amount is greater, debit Bad Debts Expense and credit Allowance for Doubtful Accounts with the difference.

For case (c) with a $1,800 debit balance, credit Bad Debts Expense and debit Allowance for Doubtful Accounts if the total estimated uncollectible amount is less than the existing balance.