E9-19 Accounting for uncollectible accounts using the allowance method (age-of-r
ID: 2449665 • Letter: E
Question
E9-19 Accounting for uncollectible accounts using the allowance method (age-of-receivables) and reporting receivables on the balance sheet
At december 31, 2014, the account receivables balance of GPS technology is $190,000. The allowance for bad debts account has a $1,600 debit balance. GPS technology prepares the following aging schedule for its accounts receivable:
Age of accounts
Account receivable 1-30 days 31-60 days 61-90 days over 90 days
$190,000 $80,000 $60,000 $40,000 $10,000
Estimated percent uncollectible 0.4% 5.0 % 6.0% 50.0%
Requirements
1. Journalize the year- end adjusting entry for bad debts on the basis of the aging schedule. Show the T-account for the Allowance for Bad Debt at December 31, 2014.
2. Show how GPS Technology will report its net accounts receivable on its December 31,2014, balance sheet.
Explanation / Answer
Date
Account name
Debit
Credit
31 Dec 2014
Bad debts Expenses
$10720
Allowance for Doubtful debts
$10720
Allowance for Doubtful debts
31-12-2014 $1600 31-12-2014 $10720
31-12-2014 $9120
Account Receivable
31-12-2014 $190000 31-12-2014 $1600
31-12-2014 $188400
GPS Technology
Balance Sheet
Accounts Receivable $188400
Less Allowance for
Doubtful Debts $9120
179280
Date
Account name
Debit
Credit
31 Dec 2014
Bad debts Expenses
$10720
Allowance for Doubtful debts
$10720
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