Question

 Problem 8-3A Aging accounts receivable LO2, 3

 CHECK FIGURE: 2. Bad Debt Expense = $60,205

 On December 31, 2020, Toro Company's Allowance for Doubtful Accounts had an unadjusted credit balance of $31,000. The accountant for Toro has prepared a schedule of the December 31, 2020, accounts receivable by age and, on the basis of past experience, has estimated the percentage of the receivables in each age category that will become uncollectible. This information is summarized as follows:

Required

 1. Calculate the amount that should appear in the December 31, 2020, balance sheet as the Allowance in Doubtful Accounts.

 2. Prepare the journal entry to record bad debt expense for 2020. 

Analysis Component: On June 30, 2021, Toro Company concluded that a customer's $7,500 receiveable (created in 2020) was uncollectible and that the account should be written off. What effect will this action Toro's 2021 profit? Explain your answer.

Answer 1

Accounts receiavable	Age of accounts receivable	Amount
$                                         1,500,000.00	1.25%	$     18,750
$                                            708,000.00	2%	$     14,160
$                                            152,000.00	6.50%	$        9,880
$                                               98,000.00	32.75%	$     32,095
$                                               24,000.00	68%	$     16,320
		$     91,205
Ques 1
Balance sheet will show	$                                       91,205
Ques 2
Bad debt expense	$                                       60,205
allowance for doubtful accounts		$     60,205
(91205-31000)
Analysis component:
This write off would not effect profit
because entry for write offs in allowance method will be made by
Allowance for bad debts	$                                          7,500
Accounts receivable		$        7,500