Daley Company estimates uncollectible accounts using the allowance method at Dec

Question

Daley Company estimates uncollectible accounts using the allowance method at December 31. It prepared the following aging of receivables analysis.

  

a. Complete the below table to calculate the estimated balance of Allowance for Doubtful Accounts using the aging of accounts receivable method.

b. & c. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is:

            i) $5,400 credit.

            ii) $1,900 debit.

Days Past Due Total 0 1 to 30 31 to 60 61 to 90 Over 90 Accounts receivable $ 660,000 $ 414,000 $ 108,000 $ 54,000 $ 36,000 $ 48,000 Percent uncollectible 1 % 2 % 5 % 7 % 10 %

Explanation / Answer

Accounts receivable

a

Accounts receivable

Percent uncollectible (%) Not due: $414,000 x 1% = $4,140 1 to 30: 108,000 x 2% = $2,160 31 to 60: 54,000 x 5% = $2,700 61 to 90: 36,000 x 7% = $2,520 Over 90: 48,000 x 10% = $4,800 Estimated balance of allowance for uncollectibles $16,320 credit Date General Journal Debit Credit 31-Dec Bad debts expense 10,920 =16320-5400 Allowance for doubtful accounts 10,920 31-Dec Bad debts expense 18,220 =16320+1900 Allowance for doubtful accounts 18,220

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