Question

Net Zero Products, a wholesaler of sustainable raw materials. Prepared the following aging of receivables analysis. Days Past Due Total $129,000 $84,000 1 to 30 31 to 60 61 to 90 over 90 $22,000 $9,000 $6,000 $8,000 Accounts receivable Percent uncollectible 1. Estimate the balance of the Allowance for Doubtful Accounts using the aging of accounts receivable method. 2. Prepare the adjusting entry to record bad debts expense assuming the unadjusted balance in the Allowance for Doubtful Accounts is a $1,400 credit.

Answer 1

1.

	Accounts receivable		Percent uncollectible		Uncollectible accounts
Not due	84,000	x	1%	=	840
1 to 30	22,000	x	3%	=	660
31 to 60	9,000	x	5%	=	450
61 to 90	6,000	x	8%	=	480
Over 90	8,000	x	11%	=	880
					$3,310

Estimated balance of allowance for uncollectibles = $3,310

2.

Bad debt expense = Estimated balance of allowance for uncollectibles - Existing balance of Allowance for doubtful accounts

= 3,310 - 1,400

= $1,910

Journal

	Bad debt expense	1,910
	Allowance for doubtful accounts		1,910

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