Question

Adventure Company uses the aging of accounts receivable method to estimate Bad Debt Expense. The balance of each account receivable is aged on the basis of three categories as follows: (1) 1-30 days old, (2) 30-90 days old, and (3) more than 90 days old. Based on experience, management has estimated what portion of receivables of a specific age will not be paid as follows: (1) 1%, (2) 15%, and (3) 40%, respectively. At December 31, the unadjusted credit balance in the Allowance for Doubtful Accounts was $100. The total Accounts Receivable in each age category were: (1) 1-30 days old, 565,000, (2) 30-90 days old, $10,000, and (3) more than 90 days old, S4,000. Parta. Determine the balance of the Allowance for Doubtful Accounts at the end of the current year by preparing the Aging of Accounts Receivable table. Part b. Prepare the appropriate adjusting entry dated December 31. ACCOUNT NAME DEBIT CREDIT Part c. Show how this would be reported on the Balance Sheet.

Answer 1

1.

ageing	Account receivable	% uncollectible	Allowance for uncollectibles
1-30days old	65000	1%	650[65000*1%]
30-90days old	10000	15%	1500[10000*15%]
more than 90days	4000	40%	1600[4000*40%]
		Total balance for allowance of doubtful account at year end	3750$

2.journal entry

balance for doubtful account is 100$ so 3750-100 = 3650$ should be credited

date	journal	debit	credit
December 31	bad debt expense	3650
	allowance for doubtful accounts		3650

3.balance sheet

account receivable	79000	[65000+10000+4000]
less : Allowance for uncollectibles	3750
		75250