Question

Aging Method On January 1 , Hungryman Inc. has the following balances for accounts receivable and allowance for doubtful accounts: Accounts Receivable $230,000 Allowance for Doubtful Accounts (a credit balance) 43,700 During the year, Hungryman had $1,080,000 of credit sales, collected $594,000 of accounts receivable, and wrote off $40,200 of accounts receivable as uncollectible. At year end, Hungryman performs an aging of its accounts receivable balance and estimates that $53,300 will be uncollectible. Required: 1. Calculate Hungryman's preadjustment balance in accounts receivable on December 31 . ____________

2. Calculate Hungryman's preadjustment balance in allowance for doubtful accounts on December 31. ________
3. Prepare the necessary adjusting entry for the year. If an amount box does not require an entry, leave it blank.__________

Answer 1

Hungryman's preadjustment balances in accounts receivable and allowance for doubtful accounts on December 31 are $622,500 and $56,800, respectively. The necessary adjusting entry is to increase the allowance for doubtful accounts by $9,100.

Step-by-step explanation:

To calculate Hungryman's preadjustment balance in accounts receivable on December 31, we need to consider the credit sales, collections, write-offs, and the estimate for uncollectible accounts. We start with the opening balance of accounts receivable, add the credit sales, and subtract the collections and write-offs. Finally, we subtract the estimated uncollectible amount. Therefore, the preadjustment balance in accounts receivable on December 31 is $230,000 + $1,080,000 - $594,000 - $40,200 - $53,300 = $622,500.

To calculate Hungryman's preadjustment balance in allowance for doubtful accounts on December 31, we start with the opening balance, subtract the write-offs, and add the estimated uncollectible amount. Therefore, the preadjustment balance in allowance for doubtful accounts on December 31 is a credit balance of $43,700 - $40,200 + $53,300 = $56,800.

The necessary adjusting entry for the year would be to increase the allowance for doubtful accounts by $9,100 ($56,800 - $43,700). The journal entry would be:

• Debit: Bad Debt Expense $9,100
• Credit: Allowance for Doubtful Accounts $9,100