Problem 3 (10 points) Innovative Tech Inc. (ITI) uses the aging method to estima

Question

Problem 3 (10 points) Innovative Tech Inc. (ITI) uses the aging method to estimate bad debts at year-end. At its December 31 year-end, total Accounts Receivable is $84,100, aged as follows: (1) 1-30 days old, S71,000; (2) 31-90 da old, $11,000; and (3) more than 90 days old, $2,100. Experience has shown that for each age group, th average rate of uncollectibility is (1) 2 percent, (2) 14 percent, and (3) 44 percent, respectively. Before t end-of-year adjusting entry is made, the Allowance for Doubtful Accounts has a S283 credit balance at December 31, 2016. Prepare a sch Accounts. edule to estimate an appropriate year-end balance for the Allowance for Doubtful 1. 2. Prepare the December 31, 2016 adjusting entry

Explanation / Answer

1 Rate of allowance Allowance Required A B C = A x B 1-30 days old        71,000 2%                      1,420 31-90 days old        11,000 14%                      1,540 more than 90 days old          2,100 44%                         924 Total        84,100 $                  3,884 Less: Credit balance in allowance account                         283 Adjustment Amount for bad debt expense                      3,601 2 General Journal Date Description Debit Credit Dec 31, 2016 Bad Debts Expense $      3,601 Allowance for Doubtful Accounts $               3,601 (To record allowance for credit losses.)

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.