Question

Required information

Problem 9-3A Aging accounts receivable and accounting for bad debts LO P2, P3
[The following information applies to the questions displayed below.]
Jarden Company has credit sales of $3,100,000 for year 2017. On December 31, 2017, the company’s Allowance for Doubtful Accounts has an unadjusted credit balance of $19,564. Jarden prepares a schedule of its December 31, 2017, accounts receivable by age. On the basis of past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here.
December 31, 2017
Accounts Receivable Age of
Accounts Receivable Expected Percent
Uncollectible
$ 620,000 Not yet due 0.85 %
248,000 1 to 30 days past due 1.60
49,600 31 to 60 days past due 6.10
24,800 61 to 90 days past due 30.75
4,960 Over 90 days past due 64.00
Problem 9-3A Part 1
Required:
1. Estimate the required balance of the Allowance for Doubtful Accounts at December 31, 2017, using the aging of accounts receivable method.
Problem 9-3A Part 2
2. Prepare the adjusting entry to record bad debts expense at December 31, 2017.

Answer 1

Answer and Explanation:

1.

The estimation of the required balances are as follows:

Age Balance Estimated Estimated Uncollectible amount

of Dec-31 Percentage

Accounts Uncollectible

Not yet due $620,000 0.85% $5,270.00

1–30 days $248,000 1.60% $3,968.00

31–60 days $49,600 6.10% $3,025.60

61–90 days $24,800 30.75% $7,626.00

Over 90 days $4,960 64.00% $3,174.40

Total $947,360 $23,064

2.

Now the journal entry is

but before that following calculation is needed

Ending balance of allowance for doubtful account $23,064

Less: Opening balance in allowance for doubtful account -$19,564

Bad debt expense for the year $3,500

The journal entry is

Bad debt expense $ 3,500

To Allowance for doubtful accounts $ 3,500

(Being bad debt expense is recorded)