Alpha Company uses aging of Accounts Receivable to estimate uncollectible. The u

Question

Alpha Company uses aging of Accounts Receivable to estimate uncollectible. The unadjusted Trial Balance amount of Accounts Receivable on December 31, 2016, has a balance that consists of Days Amount Uncollectible 0-60 $200,000 1% 2% 6% 61-120 90,000 Over 120 100,000 Total 5390,000 Activity during Fiscal Year 2016, for Alpha Company consisted of: July 15 Alpha wrote of the Bravo Zulu Company account as not collectable for the amount of $8,000. Oct. 20 Alpha company recovered $5,000 from the Charlie Delta Company for settlement of their prior debt that had been written off during FY 2015. Alpha Company's December 31, 2015 allowance for uncollectible accounts was $2,500. Under the aging method, what amounts should Alpha Company report at December 31, 2016 for: 1. Allowance for Uncollectible Accounts 2. Bad Debt Expense

Explanation / Answer

Days outstanding Amount Estimated Estimated uncollectible bad debts 0-60 200,000 1% 2000 61--120 90,000 2% 1800 over 120 100,000 6% 6000 total 390,000 9800 1) Allowance for uncollectible accounts 15-Jul 8,000 beg bal 2,500 20-Oct 5,000 Adjustment 10300 End bal 9,800 Allowance for uncollectible accounts = $9,800 2) Bad debts expense = $10,300

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