Question

Net Zero Products, a wholesaler of sustainable raw materials, prepares the following aging of receivables analysis. Days Past Due Total 0 1 to 30 31 to 60 61 to 90 Over 90 Accounts receivable $ 185,000 $ 100,000 $ 38,000 $ 17,000 $ 14,000 $ 16,000 Percent uncollectible 1 % 2 % 4 % 6 % 10 % 1. Estimate the balance of the Allowance for Doubtful Accounts using the aging of accounts receivable method. 2. Prepare the adjusting entry to record bad debts expense assuming the unadjusted balance in the Allowance for Doubtful Accounts is a $3,000 credit.

Answer 1

1)

Days Past Due

Total 0 1 to 30 3 1 to 60 61 to 90 Over 90

$185,000 $100,000 $38,000 $17,000 $14,000 $16,000

1% 2% 4% 6% 10%

Bad debts $1,000 $760 $680 $840 $1,600

Total bad debt = $4,880

2)

Dr Bad debt expense 4,880

Cr Allowance for doubtful accounts 4,880