Question

Net Zero Products, a wholesaler of sustainable raw materials. Prepared the following aging of receivables analysis. Total $115,200 Days Past Due 1 to 30 31 to 60 61 to 90 $18,000 $ 7,200 $4,000 38 58 88 0 $80,000 10 Accounts receivable Percent uncollectible Over 90 $6,000 11% 1. Estimate the balance of the Allowance for Doubtful Accounts using the aging of accounts receivable method. 2. Prepare the adjusting entry to record bad debts expense assuming the unadjusted balance in the Allowance for Doubtful Accounts is a $1,000 credit Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Prepare the adjusting entry to record bad debts expense assuming the unadjusted balance in the Allowance for Doubtful Accounts is a $1,000 credit.

Answer 1

Solution :

(1) Estimate of Allowance :

	Account Receivable	*	% Uncollectibles	=	Uncollectible Account
Not Due	$ 80,000	*	1%=	=	$ 800
1 to 30	$ 18,000	*	3%	=	$ 540
31 to 60	$ 7,200	*	5%	=	$ 360
61 to 90	$ 4,000	*	8%	=	$ 320
Over 90	$ 6,000	*	11%	=	$ 660
Estimated Balance of Uncollectibles	$ 2,680

(2) Journal Entry :

Bad Debts Expenses = Total Allowance Balance Required - Credit Balance Already in Account

= $ 2,680 - $ 1,000

= $ 1,680

	Debit	Credit
Bad Debts Expenses	$ 1,680
Allowance for Doubtful Debts		$ 1,680
(To record the bad debts expenses)

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