Aging Method
On January 1, 2019, Smith, Inc., has the following balances for accounts receivable and allowance for doubtful accounts:
| Accounts Receivable | $376,000 |
| Allowance for Doubtful Accounts (a credit balance) | 4,200 |
During 2019, Smith had $2,860,000 of credit sales, collected $2,905,000 of accounts receivable, and wrote off $3,850 of accounts receivable as uncollectible. At year end, Smith performs an aging of its accounts receivable balance and estimates that $3,800 will be uncollectible.
Homework Answers
1.
| Opening balance in accounts receivable | $ 376,000 |
| Add: Credit sales during the year | $ 2,860,000 |
| Less: Cash collected during the year | $ (2,905,000) |
| Less: Written off | $ (3,850) |
| Preadjustment balance in accounts receivable | $ 327,150 |
2.
| Opening balance in allowance for doubtful accounts | $ 4,200 |
| Less: Written off | $ (3,850) |
| Preadjustment balance in allowance for doubtful accounts | $ 350 |
3.
| Baddebt expenses ($3,800-$350) | $ 3,450 | |
| Allowance for doubtful accounts | $ 3,450 |
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Aging Method
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An aging of a company's accounts receivable indicates that
$4,200 is estimated to be uncollectible. If Allowance for Doubtful
Accounts has a $800 credit balance, the adjustment to record bad
debts for the period will require a
credit to Allowance for Doubtful Accounts for $5,000.
debit to Allowance for Doubtful Accounts for $3,400.
debit to Bad Debts Expense for $4,200.
debit to Bad Debts Expense for $3,400.
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