Question

Pachel Corporation reports the following information pertaining to its accounts receivable: Days Past Due 31-60 $25,000 61-90 $12,000 Over 90 $2,000 Current 1-30 $ 60,000 $ 40,000 The company's credit department provided the following estimates regarding the percent of accounts expected to eventually be written off from each category listed above: Current receivables outstanding Receivables 1-30 days past due Receivables 31-60 days past due Receivables 61-90 days past due Receivables over 90 days past due 2 % 16 40 90 The company uses a statement of financial position approach to estimate credit losses. a. Record the company's impairment loss of receivable, assuming it has a $1,400 credit balance in its Allowance for Impairment prior to making the necessary adjustment. (Omit the "$" sign in your response.) General Journal Debit Credit (Click to select) (Click to select) b. Record the company's impairment loss of receivable, assuming it has a $1,600 debit balance in its Allowance for Impairment prior to making the necessary adjustment. (Omit the "$" sign in your response.) General Journal Debit Credit (Click to select) (Click to select)

Answer 1

Current Receivables outstanding	$         60,000	2%	$        1,200
Receivables 1-30 days past due	$         40,000	4%	$        1,600
Receivables 31-60 days past due	$         25,000	16%	$        4,000
Receivables 61-90 days past due	$         12,000	40%	$        4,800
Receivables Over 90 days past due	$           2,000	90%	$        1,800
			$      13,400

Ending Balance Allowance for Impairment = $13400

(a) Bad Debt Expense/ Loss on impairment = $13400 - 1400 = $12000

Account Titles	Debit	Credit
Bad Debt Expense	$         12,000
Allowance for Impairment		$   12,000

(b) Bad Debt Expense/ Loss on impairment = $13400 + 1600 = $15000

Account Titles	Debit	Credit
Bad Debt Expense	$         15,000
Allowance for Impairment		$   15,000