Question

Use the following information for the following 4 questions. On December 31, the Tom, Inc. general ledger contained the following balances: Trade Accounts Receivable $ 615,000 Allowance for Doubtful Accounts 1,200 (debit) Net Credit Sales $ 1,529,000 Aging of the accounts receivable balance on December 31 indicated the follow - Age Amount Est % Uncollectible Est of Uncollectible Under 30 days $344,000 1.0% $ 3,440 30-90 days 156,000 3.0% 4,680 91-180 days 86,000 7.0% 6,020 181-360 days 24,000 20.0% 4,800 Over 360 days 5.000 60.0% 3,000 $615,000 $ 21,940

Answer 1

16) Unadjusted balance in allowance for doubtful accounts is $ 1,200 debit balance Based on ageing schedule, allowance for doubtful accounts to be maintained is $ 21,940/. Hence adjustment to made for (1200+21940) = $ 23,140/. Credit $ Adjusting Journal entries :- Date Account Title & Explanation Debit $ 31-Dec Bad debt expense 23,140 To Allowance for Doubtful accounts (Entry for estimated bad debt using aging of accounts receivable) 23,140 17) Amount $ Net Realizable value :- Particulars Accounts receivable (Unadjusted balance) Less: Allowance for Doubtful accounts (23140-1200) Net Realizable value of Accounts Receivable 6,15,000 (21,940) 5,93,060 18) Estimated bad debt expense is = Credit sales + 2% = (15290002%) = $ 30,580/. Balance in allowance for doubtful accounts is $ 1,200 debit Amount of bad debt expense to be reported in income statement is = (1200+30580) Amount of bad debt expense to be reported in income statement is = $ 31,780/.