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Rigney Inc. uses the allowance method to estimate uncollectible accounts receiva

ID: 1188750 • Letter: R

Question

Rigney Inc. uses the allowance method to estimate uncollectible accounts receivable. The company produced the followind aging of the accounts receivable at year -end. Calculate the total estimated bad debts based on the below information.

b. Prepare the year-end adjusting journal entry to record the bad debts using the aged uncollectible accounts receivable determined in (a). Assume the current balance in allowance for doubtful accounts is a $8,400 debit.

(c) Of the above accounts, $4,700 is determined to be specifically uncollectible. Prepare the journal entry to write off the uncollectible account.

(d) The company collects $4,700subsequently on a specific account that had previously been determined to be uncollectible in (c). prepare the journal entries necessary to restore the account and record the cash collection.

Number of Days Outstanding

Explanation / Answer

a.

Estimated bad debts are as below:

Accounts receivable

Percent

Calculations

Estimated bad debts

$73,000

2%

73,000 ×2% =

$1,460

$40,000

5%

40,000 ×5% =

$2,000

$33,900

6%

33,900 ×6% =

$2,034

$17,900

9%

17,900 ×9% =

$1,611

$10,600

21%

10,600 ×21% =

$2,226

Total

$9,331

b.

The required journal entry is as below:

Date

Accounting titles and explanation

P.ref.

Debit

Credit

Bad debts expense

$9,331

Allowance for doubtful accounts

$9,331

To record the estimated amount of uncollectible accounts.

c.

The required journal entry is as below:

Date

Accounting titles and explanation

P.ref.

Debit

Credit

Allowance for doubtful accounts

$4,700

Accounts receivable

$4,700

To record write-off uncollectible

d.

The required journal entry is as below:

Date

Accounting titles and explanation

P.ref.

Debit

Credit

Accounts receivable

$4,700

Allowance for doubtful accounts

$4,700

To record the reverse entry of write-off uncollectible.

Cash

$4,700

Accounts receivable

$4,700

To record collection of account.

Accounts receivable

Percent

Calculations

Estimated bad debts

$73,000

2%

73,000 ×2% =

$1,460

$40,000

5%

40,000 ×5% =

$2,000

$33,900

6%

33,900 ×6% =

$2,034

$17,900

9%

17,900 ×9% =

$1,611

$10,600

21%

10,600 ×21% =

$2,226

Total

$9,331

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