Question

Required information [The following information applies to the questions displayed below.) Daley Company prepared the following aging of receivables analysis at December 31. Days Past Due Total $665,000 tal 0 $415,000 2% Accounts receivable Percent uncollectible 1 to 30 $109,000 3% 31 to 60 $55,000 61 to 90 $37,000 8% Over 90 $49,000 11% 6% ory a. Estimate the balance of the Allowance for Doubtful Accounts assuming the company uses 4% of total accounts receivable to estimate uncollectibles, instead of the aging of receivables 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 $13,900 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 $2,900 debit.

Answer 1

Requirement a: Estimated balance of allowance for uncollectibles = $665,000 x 4% = $26,600 Requirement b: Credit Date Dec. 31 General Journal Bad debt expense (26,600-13,900) Allowance for doubtful accounts Debit 12,700 12,700 Requirement c: Credit Date Dec. 31 General Journal Bad debt expense (26,600+2,900) Allowance for doubtful accounts Debit 29,500 29,500