Question

Daley Company estimates uncollectible accounts using the allowance method at December 31. It prepared the following aging of receivables analysis. 

		Days Past Due
	Total	0	1 to 30	31 to 60	61 to 90	Over 90
Accounts receivable	$570,000	$396,000	$90,000	$36,000	$18,000	$30,000
Percent uncollectible		1%	2%	5%	7%	10%

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 $3,600 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 $100 debit.

Answer 1

a. Complete the below table to calculate the estimated balance of Allowance for Doubtful Accounts using the aging of accounts receivable method.

	0	1-30	31-60	61-90	Over 90	Total
Account receivable	396000	90000	36000	18000	30000	570000
Estimated uncollectible (%)	1%	2%	5%	7%	10%
Estimated uncollectible ($)	3960	1800	1800	1260	3000	11820

b) Adjusting entry

Date	account and explanation	debit	credit
	Bad debt expense (11820-3600)	8220
	Allowance for doubtful accounts		8220
	(To record adjusting entry)

c) Adjusting entry

Date	account and explanation	debit	credit
	Bad debt expense (11820+100)	11920
	Allowance for doubtful accounts		11920
	(To record adjusting entry)