Question

Canarie Ltd. prepares an aging schedule for its accounts receivable at the end of each month and records bad debts expense monthly. The following selected information is from Canarie’s partial aging schedule at the end of July: Number of Days Outstanding Accounts Receivable Estimated Percentage Uncollectible 0–30 days $719,000 2% 31–60 days 326,000 6% 61–90 days 121,000 11% Over 90 days 78,000 23% Total $1,244,000 The unadjusted balance in Allowance for Doubtful Accounts is a credit of $13,000.

(a) Your answer is correct. Complete the aging schedule and calculate the total estimated uncollectible accounts from the above information. Number of Days Outstanding Accounts Receivable Estimated Percentage Uncollectible Estimated Uncollectible Accounts 0–30 days $719,000 2% $ 31–60 days 326,000 6% 61–90 days 121,000 11% Over 90 days 78,000 23% Total $1,244,000 $ Show List of Accounts Link to Text Attempts: 1 of 3 used

(b) Your answer is partially correct. Try again. Prepare the adjusting journal entry to record the bad debts using the information determined above. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit Would your journal entry be different if the unadjusted balance in Allowance for Doubtful Accounts were a debit of $13,000? YesNo the bad debts expense would be $

Answer 1

(a) 13 14 Number of Estimated Estimated Accounts Uncollectible 15 Days outstanding 0-30 days Percentage Uncollectible(2) Accounts(1x2) Receivable(1) 16 $719,000 $14,380 2% 31-60 days 61-90 days 17 $326,000 $19,560 6% 18 $121,000 11% $13,310 Over 90 19 $78,000 $17,940 23% days Total $65,190 20 $1,244,000 21 Total estimated uncollectible accounts=$65,190 22

(b) Account Titles and Explanation Debit Credit Bad-debt expense Allowance for Doubtful accounts $52,190 $52,190 Allowance for Doubtful accounts required Unadjusted balance in Allowance for Doubtful accounts Additional provision to be created $65,190 ($13,000) $52,190 If the Baddebt written-off exceeds the the credit balance in the allowance for Doubtful accounts, it ends up in negative allowance ie, a debit balance. Debit balance of $13,000 requires a different journal entry. Allowance for Doubtful accounts required Add: Baddebt written-off in $65,190 excess of allowance for Doubtful accounts Provision to be created $13,000 $78,190 Account Titles and Explanation Bad-debt expense Debit Credit $78,190 Allowance for Doubtful accounts $78,190
Yes, journal entry would be different if the unadjusted balance in Allowance for Doubtful Accounts were a debit of $13,000. Bad debt expense =$78190.

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