Question

Baltimore Company uses aging to estimate uncollectibles.  At the end of the fiscal year, December 31, 2018, Accounts Receivable has a balance that consists of:

Dollar Value	Age of Account	Estimated Collectible
$180,000	< 30 days old	99%
60,000	30 to 60 days old	90%
20,000	61 to 120 days old	70%
8,000	> 120 days old	12%

The current unadjusted Allowance for Uncollectible Accounts balance is a debit balance of $2,000 and the Bad Debt Expense accounts has an unadjusted balance of zero. After the adjusting entry is made, what will be the dollar balances in the Allowance for Doubtful Accounts? Round to nearest whole dollar.

Answer 1

Calculate following

Dollar value	Age of account	Estimated uncollectible	Uncollectible amount
180000	< 30 days old	1%	1800
60000	30 to 60 days old	10%	6000
20000	61 to 120 days old	30%	6000
8000	>120 days old	88%	7040
Total			20840

After adjusting entry, dollar balances in the allowance for doubtful accounts = 20840-2000 = 18840 Credit