Question

Wildhorse Inc. uses the allowance method to estimate uncollectible accounts receivable. The company produced the following aging of the accounts receivable at year-end.

Calculate the total estimated bad debts based on the below information.

				Number of Days Outstanding
		Total		0–30		31–60		61–90		91–120		Over 120
Accounts receivable		166,400		71,700		37,800		32,600		15,700		$8,600
% uncollectible				1%		4%		5%		8%		20%
Estimated Bad debts

(b)		Prepare the year-end adjusting journal entry to record the bad debts using the aged uncollectible accounts receivable determined in (a). Assume the current balance in Allowance for Doubtful Accounts is a $7,500 debit.
(c)		Of the above accounts, $5,500 is determined to be specifically uncollectible. Prepare the journal entry to write off the uncollectible account.
(d)		The company collects $5,500 subsequently on a specific account that had previously been determined to be uncollectible in (c). Prepare the journal entries necessary to restore the account and record the cash collection.

Answer 1

a
	Number of Days Outstanding
	Total	0–30	31–60	61–90	91–120	Over 120
Accounts receivable	166400	71700	37800	32600	15700	8600
% uncollectible		1%	4%	5%	8%	20%
Estimated Bad debts	6835	717	1512	1630	1256	1720
b
	Debit	Credit
Bad Debts expense	14335		=6835+7500
Allowance for Doubtful Accounts		14335
c
	Debit	Credit
Allowance for Doubtful Accounts	5500
Accounts Receivable		5500
d
	Debit	Credit
Accounts Receivable	5500
Allowance for Doubtful Accounts		5500
Cash	5500
Accounts Receivable		5500