Question

Southwest Pediatrics has the following balances on December 31, 2021, before any adjustment Accounts Receivable - $ 130,000: Allowance for Uncollectible Accounts - $2.100 (debit). On December 31,2021. Southwest estimates uncollectible accounts to be 20% of accounts receivable.

Required:

1. Record the adjusting entry for uncollectible accounts on December 31, 2021. If no entry is required for a particular. transaction/event, select "No Journal Entry Required" in the first account field.)

2. Determine the amount at which bad debt expenses is reported in the income statement and the allowance for uncollectible accounts is reported in the balance sheet.

3. Calculate net accounts receivable.

Answer 1

(1)

Estimated uncollectible accounts = $130000 x 20% = $26000

Existing balance in the allowance for uncollectible accounts = $2100 debit

therefore, as per percentage of receivables method,

Amount to be debited to bad debts expense to adjust the allowance for doubtful accounts to its desired ending balance on 31.12.2021

= $26000 + $2100

= $28100

therefore,

Date	Particulars	Debit	Credit
December 31, 2021	Bad debt expenses Allowance for uncollectible accounts	$28100 .	. $28100

(2)

Bad debt expense	$28100
Allowance for uncollectible accounts	$26000

(3)

Net accounts receivable = gross accounts receivable - allowance for doubtful accounts

= $130000 - $26000

= $104000

Answer 2

		Uncollectable amount	$26,000	(20%*130000)
		As on December 31, Debit balance Allowance for Uncollectable	$2,100
		Amount of adjustment required	$28,100	(26000+2100)
		JOURNAL ENTRY
	DATE	ACCOUNT TITLE	DEBIT	CREDIT
	Dec., 31	Bad debt expenses	$28,100
		Allowance for Uncollectable		$28,100
	2	Reported in Balance Sheet
		Bad debt expenses	$28,100
		Allowance for Uncollectable	$26,000
	3	Total Accounts Receivable	$130,000
		Net Accounts Receivable	$104,000	(130000-26000)