Jarden Company has credit sales of $2.30 million for year 2015. On December 31,

Question

Jarden Company has credit sales of $2.30 million for year 2015. On December 31, 2015, the company’s Allowance for Doubtful Accounts has an unadjusted credit balance of $14,718. Jarden prepares a schedule of its December 31, 2015, accounts receivable by age. On the basis of past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here. December 31, 2015 Accounts Receivable Age of Accounts Receivable Expected Percent Uncollectible $ 460,000 Not yet due 1.10 % 184,000 1 to 30 days past due 1.85 36,800 31 to 60 days past due 6.35 18,400 61 to 90 days past due 32.00 3,680 Over 90 days past due 66.00 rev: 05_14_2015_QC_30626 6.value: 5.00 pointsRequired information Required: 1. Estimate the required balance of the Allowance for Doubtful Accounts at December 31, 2015, using the aging of accounts receivable method.

Explanation / Answer

Answer:

Allowance for Doubtful Accounts has a credit balance and is created by figuring a credit balance & this account is transferred or adjusted or decuted with the Accounts Receivable resulting Accounts Receivable balance is decreased..

As per question, on 31 Dec 2015 Allowance for Doubtful Accounts ....$14,718 (Credit Balance)

Calculation of Uncollectible Amount of Accounts Receivable

As from the above table the total expected uncollectible amount would come $19,118 and Allowance for Doubtful Accounts has already $14,718 (Credit Balance)...there is a need to enter additional credit of $4,400 into the Allowance for Doubtful Accounts (Balance Sheet A/c) and on the other side this amount need to enter into Bad Debt Expenses (Profit & loss Statement)..

So, on Dec 31, 2015 the following journal entry is to be passed:

Bad Debt Expeses (Profit & Loss A/c) Dr...$4,400

To Allowance for Doubtful Accounts $4,400

Therefore, the required balance of the Allowance for Doubtful Accounts at December 31, 2015 is $19,118

Thank you..

December 31, 2015 Accounts Receivable Age of Accounts Receivable Expected Percent Uncollectible Uncollectible Amount $460,000 Not yet due 1.10% $5,060 $184,000 1 to 30 days past due 1.85% $3,404 $36,800 31 to 60 days past due 6.35% $2,337 $18,400 61 to 90 days past due 32% $5,888 $3,680 Over 90 days past due 66% $2,429 Total Uncollectible Amount on Dec 31, 2015 $19,118

Related Questions

Navigate

• Browse (All)
• Browse J
• Subjects

---

---

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