A company ages its accounts receivable as follows: Age Interval Balance Percent

ID: 2435979 • Letter: A

Question

A company ages its accounts receivable as follows:

Age Interval Balance Percent Uncollectible
Not past due $865,000 1%
1-30 days past due 110,000 2%
31-90 days past due 65,000 15%
91-180 days past due 42,000 60%
over 180 days past due 15,000 90%

(a) Estimate what the proper balance of the allowance for doubtful accounts should be at fiscal year end.

(b) Assuming the allowance for doubtful accounts has a credit balance of $6,500 prior to adjustment; prepare the adjusting entry to record uncollectible expense at fiscal year end.
(c) Assuming the allowance for doubtful accounts has a debit balance of $4,700 prior to adjustment, prepare the adjusting entry to record uncollectible expense at fiscal year end.

Explanation / Answer

Problem Seven:

A company ages its accounts receivable as follows:

Age Interval

Balance

Percent Uncollectible

Not past due

$865,000

1-30 days past due

110,000

31-90 days past due

65,000

15%

91-180 days past due

42,000

60%

over 180 days past due

15,000

90%

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