E9-19 Accounting for uncollectible accounts using the allowance method (aging- o

Question

E9-19 Accounting for uncollectible accounts using the allowance method (aging- of-receivables) and reporting receivables on the balance sheet At December 31, 2016, the Accounts Receivable balance of TM Manufacturer is $230,000. The Allowance for Bad Debts account has a $24,000 debit balance. TM Manufacturer prepares the following aging schedule for its accounts receivable: Age of Accounts 1-30 Days $ 75,000 0.8% 61-90 Days $ 35,000 6.0% Over 90 Days $ 40,000 48.0% 31-60 Days Accounts Receivable $80,000 Estimated percent uncollectible 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 Debts at December 31, 2016. 2. Show how TM Manufacturer will report its net accounts receivable on its December 31, 2016, balance sheet.

Explanation / Answer

Age of Accounts Receivable 1-30 Days 31-60 Days 61-90 Days Over 90 days Total Receivables Accounts Receivable $75,000 $80,000 $35,000 $40,000 $230,000 Percent uncollectible x 0.8% x 4.0% x 6.0% x 48.0% Estimated total uncollectible $              600 $          3,200 $        2,100 $         19,200 $                   25,100 Target Balance Date Accounts and Explanation Debit Credit Dec. 31 2016 Bad Debts Expense(24000 debit + 25100) $        49,100 Allowance for Bad Debts $        49,100 Allowance for Bad Debts Bal                                                                       24,000 Expense            49,100 Bal            25,100 TM MANUFACTURER Balance Sheet-Partial December 31, 2016 Assets Current Assets: Accounts Receivable $230,000 Less: Allowance for Bad Debts          (25,100)          204,900

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