Question

Check my wo E6-23 (Algo) Recording, Reporting, and Evaluating a Bad Debt Estimate Using Aging Analysis L06-2 Brown Cow Dairy uses the aging approach to estimate bad debt expense. The ending balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $11,000; (2) up to 120 days past due, $4,000; and (3) more than 120 days past that for each age group, the average loss rate on the amount of the receivables at year-end due to uncollectibility is (t) 4 percent, (2) 14 percent, and (3) 30 percent, respectively. At December 31 (end of the current year), the Allowance for Doubtful Accounts balance is $670 (credit) before the end-of-period adjusting entry is made. eBook Hint Data during the current year follow: a. During December, an Account Receivable (Patty's Bake Shop) of $620 from a prior sale was determined to be uncollectible; therefore, it was den off immediately as a bad debt. b. On December the appropriate adjusting entry for the year was recorded. References Required: 1. Give the required journal entries for the two items listed above. 2. Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the income statement and balance sheet for the current year. Disregard income tax considerations. Complete this question by entering your answers in the tabs below. Reg 1 Red 2A Reg 28 Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the income statement for the current year. Disregard income tax considerations. BROWN COW DAIRY

Answer 1

	WORKINGS FOR ALLOWANCE REQUIRED AS ON DECEMBER 31:
	Time Period	Balance Due	Loss %	Amount of Loss
	Not yet due	$            11,000	4	$                 440
	Upto 120 days past due	$              4,000	14	$                 560
	More than 120 days past due	$              3,500	30	$              1,050
	Total	$            18,500		$              2,050
1]	Allowance for doubtful accounts	$                  620
	Accounts receivable		$               620
	Bad debts expense [2050-670]	$              1,380
	Allowancefor doubtful accounts		$           1,380
	Note:
	It is presumed that the balance of $670 in the allowance for
	doubtful accounts is after the write off of $620 at [a] above.
2]	INCOME STATEMENT:
	Operating expenses:
	Bad debts expense	$              1,380
	BALANCE SHEET:
	CURRENT ASSETS:
	Accounts receivable	$            18,500
	Less: Allowance for doubtful accounts	$              2,050
	Accounts receivable [net]	$            16,450