Question

Zuo Software categorizes its accounts receivable into four age groups for purposes of estimating its allowance for uncollectible accounts. Accounts not yet due = $450,000; estimated uncollectible = 5%. Accounts 1–30 days past due = $56,300; estimated uncollectible = 9%. Accounts 31–90 days past due = $45,000; estimated uncollectible = 13% Accounts more than 90 days past due = $33,800; estimated uncollectible = 17%. At 12/31/2021, before recording any adjustments, Zuo has a credit balance of $23,400 in its allowance for uncollectible accounts. Required: 1. Estimate the appropriate 12/31/2021 balance for Zuo’s allowance for uncollectible accounts. 2. What journal entry should Zuo record to adjust its allowance for uncollectible accounts? 3. Calculate Zuo’s 12/31/2021 net accounts receivable balance.

Answer 1

1. Appropriate balance for Zuo’s allowance for uncollectible accounts at 12/31/2021 is $39,163

Account titles Debit ($) Credit ($)

Bad debt expense $15,763

Allowance for uncollectible amount $15,763

3. Net Account Receivables = $545,937

Step-by-step explanation:

Accounts not yet due = $450,000; estimated uncollectible = 5%.

Accounts 1–30 days past due = $56,300; estimated uncollectible = 9%.

Accounts 31–90 days past due = $45,000; estimated uncollectible = 13%

Accounts more than 90 days past due = $33,800; estimated uncollectible = 17%

1. Calculation of estimated collectible amount

Dollar value Percent Uncollectible Amount Uncollectible

$450,000 5% $ 22,500

$56,300 9% $ 5,067

$45,000 13% $ 5,850

$33,800 17% $ 5,746

Appropriate balance for Zuo’s allowance for uncollectible accounts at 12/31/2021 = $22,500 + $5,067 + $5,850 + $5,746 = $39,163

2. Account titles Debit ($) Credit ($)

Bad debt expense $15,763

Allowance for uncollectible amount $15,763

Adjusting entry = $39,163 - $23,400 = $15,763

3). Net account receivable balance on 12/31/2021:

Accounts receivables total = $585,100

Less: Allowance for uncollectible account = $39,163

Net Account Receivables = $545,937