Question

4. Temper Company has credit sales of $3.10 million for year 2010. Temper estimates that 0.9% of the credit sales will not be collected. On December 31, 2010, the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $2,222. Temper prepares a schedule of its December 31, 2010, accounts receivable by age. Based on past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here: 25 points December 31, 2010 Age of Accounts Expected Percent Accounts Receivable Receivable Uncollectible S620,000 Not yet due 1.05% 248,000 1 to 30 days past due 1.80 49,600 31 to 60 days past due 6.30 24,800 61 to 90 days past due 31.75 4,960 Over 90 days past due 66.00 Required: Assuming the company uses the aging of Accounts Receivable method, what journal entry will Temper make for Bad Debt Expense in the December 31 adjustment journal? Date Accounts Dr.Cr.

Answer 1

Answer

	Accounts title	Debit	Credit
31 December	Bad Debt Expense [or Uncollectible account expense]	$23,024
	Allowance for Doubtful account		$23,024

--Working

Number of Days	Receivables
Past Due	Amount	% uncollectible	Uncollectible amount
Not Due	$620,000	1.05%	$6,510
0-30	$248,000	1.80%	$4,464
31-60	$49,600	6.30%	$3,125
61-90	$24,800	31.75%	$7,874
Over 90	$4,960	66.00%	$3,274
Adjusted balance required of Allowance for Doubtful Account (A)			$25,246
Unadjusted balance in the Allowance account (B) - Credit (Debit)			$2,222
Bad Debt expense : (A - B)			$23,024