A company has the following balances on December 31, 2021, before any year-end adjustments: Accounts Receivable = $83,000; Allowance for Uncollectible Accounts = $1,100 (credit). The company estimates uncollectible accounts based on an aging of accounts receivable as shown below:
Estimated | |||||
Amount | Percent | ||||
Age Group | Receivable | Uncollectible | |||
Not yet due | $ | 45,000 | 3 | % | |
0 − 30 days past due | 17,000 | 25 | % | ||
31 − 90 days past due | 13,000 | 50 | % | ||
More than 90 days past due | 8,000 | 70 | % | ||
Total | $ | 83,000 | |||
Record the adjustment for uncollectible accounts on December 31, 2021. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
Solution:
Computation of Year end allowance for estimated uncollectibles | |||
Age | Balance | % Uncollectibles | Estimated Uncollectibles |
Not yet due | $45,000 | 3% | $1,350 |
1-30 days | $17,000 | 25% | $4,250 |
31-90 days | $13,000 | 50% | $6,500 |
More than 90 days | $8,000 | 70% | $5,600 |
Total | $17,700 | ||
Date | Particulars | Debit | Credit |
31-Dec | Bad debts expense Dr ($17700 - $1100) | $16,600 | |
To Allowance for doubtful accounts | $16,600 | ||
(To record bad debts expense) |
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