1.(5 points) A company has the following unadjusted account balances at December

Question

1.(5 points) A company has the following unadjusted account balances at December 31, of the current year; Accounts Receivable of $185,700 and Allowance for Doubtful Accounts of $1,600 (credit balance The company uses the aging of accounts receivable to estimate its bad debts. The following aging schedule reflects its accounts receivable at the current year-end: Estimated Account Age Current (not yet due) $96,000 1.0% 1-30 days past due 64,000 2.5% 30-60 days past due 16,000 11.0% 61-90 days past due 6,500 370% Over 90 days past due 3,200 70.0% Total $185,700 a. Calculate the amount of the Allowance for Doubtful Accounts and show how Accounts Receivabl with the Allowance will appear on the current year-end balance sheet as of December 31. b. Prepare the adjusting journal entry to record bad debts expense for the current year. Date Debit Credit

Explanation / Answer

Allowance for Doubtful Accounts is = (96000*1%)+(64000*2.5%)+(16000*11%)+(6500*37%)+(3200*70%)

Allowance for doubtful accounts is = 960+1600+1760+2405+2240 = $ 8,965/-

So allowance for Doubtful Accounts is $ 8,965/-

Presentation of Accounts Receivable in Balance sheet as at 31st December :-

Current Assets:-

Accounts Receivable 185,700

Less: Allowance for Doubtful Accounts (10,565)

Net Accounts Receivable balance. 175,135

b) Journal entry to record allowance for Doubtful Accounts is :-

Bad debt Expenses Dr. 8,965

To Allowance for Doubtful Accounts. 8,965

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