Question

Zuo Software categorizes its accounts receivable into four age groups for purposes of estimating its allowance for uncollectible accounts.

 1. Accounts not yet due = $446,000; estimated uncollectible = 20%.

 2. Accounts 1–30 days past due = $55,800; estimated uncollectible = 23%.

 3. Accounts 31–90 days past due = $44,600; estimated uncollectible = 26%

 4. Accounts more than 90 days past due = $33,500; estimated uncollectible = 29%.

At 12/31/2021, before recording any adjustments, Zuo has a credit balance of $26,800 in its allowance for uncollectible accounts.

Required:

 1. Estimate the appropriate 12/31/2021 balance for Zuo's allowance for uncollectible accounts.

 2. What journal entry should Zuo record to adjust its allowance for uncollectible accounts?

 3. Calculate Zuo's 12/31/2021 net accounts receivable balance.

Answer 1

Answer

• Requirement 1

Balance in Allowance for uncollectible accounts = Accounts receivables x % uncollectible
= ($446000 x 20%) + (55800 x 23%) + (44600 x 26%) + (33500 x 29%)
= 89200+12834+11596+9715
= $ 123,345 Answer

• Requirement 2
  >Required adjusted balance in Allowance account = $ 123345 Credit
  >Unadjusted balance in Allowance account = $ 26800 Credit
  >Amount of adjustment required = 123345 – 26800 = $ 96,545

Adjusting entry

	General Journal	Debit	Credit
1	Uncollectible account expense (or Bad Debt expense)	$96,545
	Allowance for Uncollectible account		$96,545

• Requirement 3

Net account receivables balance = Accounts receivables – Allowance account balance
= ($446000 + 55800 + 44600 + 33500) - $ 123345
= $ 579,900 – 123345
= $ 456,555