Complete question text:
1. Depreciation on the equipment for the month of January is calculated using the straight-line method. At the time the equipment was purchased, the company estimated residual value of $4,500 and two-year service life. Equipment cost $16,000
2. The company estimates future uncollectible accounts. The company determines $13,000 of accounts receivable on January 31 are past due, and 30% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 4% of these accounts are estimated to be uncollectible.
Account Receivable 46,400
Allowance 4,300
Answer:
depreciation expense 479.17 debit
accumulated depreciation - equipment 479.17 credit
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uncollectible account expense 2,236 debit
allowance for uncollectible amount 2,236 credit
Step-by-step explanation:
We solve for the yearly depreciation:
(cost - residual value) / useful life
(16,000 - 4,500) / 2 = 5,750 per year
monthly depreciation: 5,750 / 12 = 479,17
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We solve for the different receivables ages:
13,000 x 40% = 5,200
46,400 - 13,000 = 33,400 not past due
33,400 x 4% = 1,336
we add them together and get 6,536
now we compare against the current allowance to determiantethe adjustment:
6,536 - 4,300 = 2,236