Question

Credit Losses Based on Accounts Receivable

Hunter, Inc., analyzed its accounts receivable balances at December 31, and arrived at the aged balances listed below, along with the percentage that is estimated to be uncollectible:

Age Group	Balance	Probability of Noncollection
0-30 days past due	$94,000	1%
31-60 days past due	24,000	2%
61-120 days past due	15,000	5%
121-180 days past due	10,000	10%
Over 180 days past due	8,000	25%
	$151,000

The company handles credit losses using the allowance method. The credit balance of the Allowance for Doubtful Accounts is $520 on December 31, before any adjustments.

1. Prepare the adjusting entry for estimated credit losses on December 31.
2. Prepare the journal entry to write off the Rose Company's account on April 10 of the following year in the amount of $425

a.

General Journal
Date	Description	Debit	Credit
Dec.31	AnswerBad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable - Rose Company	Answer	Answer
	AnswerBad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable - Rose Company	Answer	Answer
	To record allowance for credit losses.

b.

General Journal
Date	Description	Debit	Credit
April 10	AnswerBad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable - Rose Company	Answer	Answer
	AnswerBad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable - Rose Company	Answer	Answer
	To write off Rose Company's account.

Please answer all parts of the question.

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Answer 1

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Hunter, Inc.,
Allowance for Doubtful Accounts that should be at year end:
	A	B	C=A*B
Age Group	Amount $	Uncollectible %	Allowance for Doubtful Accounts
0-30 Days	94,000.00	1%	940.00
31-60 Days	24,000.00	2%	480.00
61-120 Days	15,000.00	5%	750.00
121-180 Days	10,000.00	10%	1,000.00
Over 180 days	8,000.00	25%	2,000.00
	151,000.00		5,170.00
Allowance for Doubtful Accounts should be at the year end is $ 5,170.
Bad debt expense at year end:		Note
Allowance for Doubtful Accounts should be	5,170.00	See C
Opening Allowance for Doubtful Accounts	520.00	D
Bad debt expense for December 31:	4,650.00	E=C-D
Adjusting Entry
Account	Debit ($)	Credit ($)
Bad debt Expense	4,650.00
Allowance for Doubtful Accounts		4,650.00
Journal Entry on April 10
Account	Debit ($)	Credit ($)
Allowance for Doubtful Accounts	425.00
Accounts Receivable- Rose Company		425.00
(being Accounts Receivable of Rose Company is uncollectible and written off)