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. 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 a $4,800 credit.

 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 a $1,300 debit.

Answer 1

Solution a:

Computation of Allowance for Uncollectible Accounts - Daley Company
Ageing	Accounts Receivables	% Uncollectible	Required Allowance
0 days	$408,000.00	1%	$4,080.00
1 to 30 days	$102,000.00	2%	$2,040.00
31 to 60 days	$48,000.00	5%	$2,400.00
61 to 90 days	$30,000.00	7%	$2,100.00
Over 90 days	$42,000.00	10%	$4,200.00
Total	$630,000.00		$14,820.00

Solution b:

Journal Entries - Daley Company
Event	Particulars	Debit	Credit
1	Bad debts expense Dr ($14,820 - $4,800)	$10,020.00
	To Allowance for doubtful accounts		$10,020.00
	(To record bad debts expenses)

Solution c:

Journal Entries - Daley Company
Event	Particulars	Debit	Credit
1	Bad debts expense Dr ($14,820 + $1,300)	$16,120.00
	To Allowance for doubtful accounts		$16,120.00
	(To record bad debts expenses)