value: 2.00 points Innovative Tech Inc. (ITI) uses the percentage of credit sale
ID: 2396713 • Letter: V
Question
value: 2.00 points Innovative Tech Inc. (ITI) uses the percentage of credit sales method to estimate bad debts each month and then uses the aging method at year-end. During November, ITI sold services on account for $130,000 and estimated that 1/2 of one percent of those sales would be uncollectible. At its December 31 year-end, total Accounts Receivable is $99,900, aged as follows: (1) 1-30 days old, $84,000; (2) 31-90 days old, $11,000; and (3) more than 90 days old, $4,900. Experience has shown that for each age group, the average rate of uncollectibility is (1) 10 percent, (2) 20 percent, and (3) 40 percent, respectively. Before the end-of-year adjusting entry is made, the Allowance for Doubtful Accounts has a $2,050 credit balance at December 31 Required 1. Prepare the November adjusting entry for bad debts. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet Record the adjusting entry for bad debts as of November 30 Note: Enter debits before credits. Date General Journal Debit Credit Nov 30 Bad Debt Expense Allowance for Doubtful Accounts Record entry Clear entry View general journalExplanation / Answer
Date General journal Debit Credit 30-Nov Bad Debts expense 650 Allowance for Doubtful accounts 650 (130,000*1/2*1%) 2) 1--30 31---90 >90 Total Accounts receivable 84,000 11,000 4,900 99,900 Estimated uncollectible (%) 10% 20% 40% Estimated uncollectible 8400 2200 1960 12560 3) Adjusting entry Date General journal Debit Credit 31-Dec Bad Debts expense 10510 Allowance for Doubtful accounts 10,510 (12,560-2,050) 4) Balance Sheet(partial) Accounts receivable 99,900 less:Allowance for Doubtful accounts 10,510 Net realizable value 89,390
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