11. A company has the following unadjusted account balances at December 31, of t

Question

11. 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 Uncollectible Account Age Current (not yet due). 1-30 days past due Balance Percentage 1.0% 61-90 days past du... Over 90 days past due .. Total 64,000 3.5 16,000 12.0 6,500 42.0 3.20067.0 $185,700 a) Calculate the amount of the Allowance for Doubtful Accounts that should appear on the December 31, of the current year, balance sheet. Three (3) points Est Uncollectible Est Balance of Uncollectible Account Age Balance Amount Current (not yet due 96,000 1-30 days past due 64,000 3.5% 31-60 days past due S 16,000 12% 61-90 past due Over 90 days past due S 6,500 $ 3,200 $ 185,700 67% Total b) Prepare the adjusting journal entry to record bad debts expense for the current year. Two (2) points Date Account Titles and Explanation Debit Credit

Explanation / Answer

Ans. A Account age Balance Est. Uncollectible Est. balance of uncollectible account current (not yet due) 96000 1% 960 1 - 30 days past due 64000 3.50% 2240 31 - 60 days past due 16000 12% 1920 61 - 90 days past due 6500 42% 2730 Over 90 days past due 3200 67% 2144 Total 185700 9994 Ans. B Account Titles and Explanations Debit Credit Desired balance in Allowance account 9994 Current balance in allowance account 1600 Amount of adjustment 8394 *Est. balance in uncollectible account = Balance * Est. uncollectible

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