Question

91-120 Over 120 31-60 61-90 Total 0-30 $80,000 $30,000 $20,000 $10,000 $300,000 A/R $160,000 %5 15% 25% % 1% 4% Estimated Bad Debt The unadjusted balance in the Allowance for Doubtful Accounts is a $3,000 credit balance. Prepare the year end adjusting entry to record the bad debts using the Allowance method: On March 1 of the following year, notice is received that customer XYZ will not be able to pay the 1,000 owed. Prepare the journal entry for the actual write off of the XYZ account receiva ble. On May 15, XYZ sends a check for $500. Preparre the journal entry for the reversal of the write off of the XYZ account receivable. Prepare the year end adjusting entry using the same aging schedule above, but this time assume the unadjusted balance in the Allowance for Doubtful Accounts is a $5,000 debit balance:

Answer 1

| Total 0-30 Accounts Receivable | $ 300,000 $160,000 1% Estimated Bad Debt $ 11,800 $ 1,600 3 1-60 $80,000 4% $ 3,200 61-90 $ 30,000 5% $ 1,500 91-120 $ 20,000 15% $ 3,000 Over 120 $10,000 25% $ 2,500 Year end adjusting entry for bad debts using allowance method: Unadjusted Balance in Allowance for Doubtful accounts (A) Estimated Bad Debts (B) Additional Allowance to be created at year end (B-A) $ (3,000) credit balance $ (11,800) $ (8,800) $ 8,800 Bad Debts To Allowance for Doubtful Accounts $ 8,800 Journal entry for actual write off of the XYZ accounts receivable on 1st Mar $ 1,000 Allowance for Doubtful Accounts To Accounts Receivable $ 1,000 Journal entry for reversal of the write off of the XYZ accounts receivable on 15th May

$ 500 Accounts Receivable To Bad Debts $ 500 $ 500 Cash To Accounts Receivable $ 500

Year end adjusting entry for bad debts using allowance method: Unadjusted Balance in Allowance for Doubtful accounts (A) Estimated Bad Debts (B) Additional Allowance to be created at year end (B-A) $ $ $ 5,000 Debit balance (11,800) (16,800) $ 16,800 Bad Debts To Allowance for Doubtful Accounts $ 16,800