Question

Total 0 1 to 30 31 to 60 61 to 90 over 90

accs reveivable 570,000 $396,000 90,000 36,000 18,000 30,000
% uncollectible 1% 2% 5% 7% 10%

a. Estimate the balance of the Allowance for Doubtful Accounts assuming the company uses 4.5% of total accounts receivable to estimate uncollectibles, instead of the aging of receivables 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 $12,000 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 $1,000 debit.

Answer 1

a. $25,650

b. Journal entries

Step-by-step explanation:

The computation is shown below:

a. The balance of the Allowance for Doubtful Accounts is

= Total account receivable × estimated percentage

= $570,000 × 4.5%

= $25,650

b. The adjusting entry is as follows

Bad Debt Expense $13,650 ($25,650 - $12,000)

To Allowance for Doubtful Accounts $13,650

(Being the bad debt expense is recorded)

c. The adjusting entry is as follows

Bad Debt Expense $26,650 ($25,650 + $1,000)

To Allowance for Doubtful Accounts $26,650

(Being the bad debt expense is recorded)