Question

 Jarden Company has credit sales of $2,700,000 for year 2018. On December 31, 2018, the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $21,490. Jarden prepares a schedule of its December 31, 2018, accounts receivable by age. On the basis of past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here.

 1. Estimate the required balance of the Allowance for Doubtful Accounts at December 31, 2018, using the aging of accounts receivable method.

 2. Prepare the adjusting entry to record bad debts expense at December 31, 2018.

Answer 1

1) Calculation of Estimated Balance of Allowance for Uncollectibles:-

	Accounts Receivable		Percent Uncollectible		Estimated Uncollectible
Not Due:	$ 540,000	x	1.45%	=	$ 7,830
1 to 30:	$ 216,000	x	2.20%	=	$ 4,752
31 to 60:	$ 43,200	x	6.70%	=	$ 2,894
61 to 90:	$ 21,600	x	33.75%	=	$ 7,290
Over 90:	$ 4,320	x	70.00%	=	$ 3,024
Estimated Balance of Allowance for Uncollectibles					$ 25,790

Therefore the required allowance for uncollectibles is $25,790, but the current unadjusted balance of allowance for doubtful accounts is $21,490. Therefore an additional allowance of $4,300 ($25,790-$21,490) is required.

2) Adjusting entry to record estimated bad debts is shown as follows:-

Journal Entries (Amounts in $)

Date	General Journal	Debit	Credit
Dec 31	Bad Debt Expense (25,790-21,490)	4,300
	Allowance for Doubtful Accounts		4,300
	(To record the estimated bad debt expense)