Question

Aging Class (Number Receivables Estimated Percent of

of Days Past Due) Balance on December Uncollectible Accounts
0-30 days $715,000 1%
31-60 days 310,000 2
61-90 days 102,000 15
91-120 days 76,000 30
More than 120 days 97,000 60
Total receivables $1,300,000
A. Journalize the write-offs under the direct write-off method. If an amount box does not require an entry, leave it blank.
B. Journalize the write-offs and the year-end adjusting entry under the allowance method, assuming that the allowance account had a beginning balance of $95,000 and the company uses the analysis of receivables method.

Answer 1

Answer and Explanation:

The journal entries are shown below:

a Bad debt expense $102,500

To Accounts Receivable-Kim Abel $21,550

To Accounts Receivable-Lee Drake $33,925

To Accounts Receivable-Jenny Green $27,565

To Accounts Receivable-Mike Lamb $19,460

(Being the bad debt expense is recorded)

b Allowance for Doubtful accounts $102,500

, To Accounts Receivable-Kim Abel $21,550

To Accounts Receivable-Lee Drake $33,925

To Accounts Receivable-Jenny Green $27,565

To Accounts Receivable-Mike Lamb $19,460

(Being the written- off amount is recorded)

Bad debt expense $117,150

Allowance for Doubtful accounts $117,150

(Being the bad debt expense is recorded)

Working notes:

(in $) (in $)

Days Receivables Balance % Uncollectible Allowance

0-30 days 715000 1% 7150

31-60 days 310000 2% 6200

61-90 days 102000 15% 15300

91-120 days 76000 30% 22800

More

than 120 days 97000 60% 58200

Total 1300000 109650

Now the adjustment balance is

= $109,650 - ($95,000 - $102,500)

= $109,650