Question

Casilda Company uses the aging approach to estimate bad debt expense. The ending balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $50,800; (2) up to 180 days past due, $14,200; and (3) more than 180 days past due, $5,300. Experience has shown that for each age group, the average loss rate on the amount of the receivables at year-end due to uncollectibility is (1) 3 percent, (2) 12 percent, and (3) 31 percent, respectively. At December 31, the end of the current year, the Allowance for Doubtful Accounts balance is $400 (credit) before the end-of-period adjusting entry is made.

Required:

1. Prepare the appropriate bad debt expense adjusting entry for the current year.

2. Show how the various accounts related to accounts receivable should be shown on the December 31, current year, balance sheet.

Prepare the appropriate bad debt expense adjusting entry for the current year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the adjusting journal entry for bad debt expense. Note: Enter debits before credits. General Journal Debit Credit Date December 31

Answer 1

Solution:

Requirement 1: Adjusting Entry for bad debt Expense

Date	General Journal	Debit	Credit
December 31	Bad Debts Expense	$             4,471
	Allowance for Doubtful Accounts		$             4,471
	(Being bad debts expense)

Notes:

1)

Allowance for Doubtful Accounts
		Beg. Balance (Given)	$                400
		Bad Debts ( Balancing Figure)	$            4,471
		End Balance (Note:2)	$            4,871

2)

	Accounts Receivable		Percent Uncollectible (%)
Not due:	$                                            50,800	*	3%	=	$          1,524
Up to 180 Days	$                                            14,200	*	12%	=	$          1,704
More than 180 Days	$                                              5,300	*	31%	=	$          1,643
Estimated Ending balance of allowance for Doubtful Accounts					$          4,871

Requirement 2:

CASILDA COMPANY
Partial Balance sheet
As of December 31
Assets
Current assets:
Accounts receivable	$             70,300
Allowance for doubtful accounts	$             (4,871)
Net Accounts Receivables		$            65,429

1)

Accounts Receivable

$                                            50,800

$                                            14,200

$                                              5,300

$                                            70,300

2)

	Accounts Receivable		Percent Uncollectible (%)
Not due:	$                                            50,800	*	3%	=	$          1,524
Up to 180 Days	$                                            14,200	*	12%	=	$          1,704
More than 180 Days	$                                              5,300	*	31%	=	$          1,643
Estimated Ending balance of allowance for Doubtful Accounts					$          4,871