Question

During 2021, its first year of operations, Pave Construction provides services on account of $160,000. By the end of 2021, cash collections on these accounts total $110,000. Pave estimates that 25% of the uncollected accounts will be uncollectible. In 2022, the company writes off uncollectible accounts of $10,000.

1. Record the adjusting entry for uncollectible accounts on December 31, 2021.

2-a. Record the write-off of accounts receivable in 2022.

2-b. Calculate the balance of Allowance for Uncollectible Accounts at the end of 2022 (before adjustment in 2022).

3-a. Assume the same facts as above but assume actual write-offs in 2022 were $15,000. Record the write-off of accounts receivable in 2022.

3-b. Assume the same facts as above but assume actual write-offs in 2022 were $15,000. Calculate the balance of Allowance for Uncollectible Accounts at the end of 2022 (before adjustment in 2022).

Answer 1

Solution 1:

Uncollected accounts receivables = $160000 - $110000 = $50,000)

Date	Accounts title	debit	credit
31-Dec-2021	Bad debt expense ($50,000*25%)	12500
	Allowance for uncollectible acccounts		12500

Solution 2a:

2022	Allowance for uncollectible accounts	10000
	Accounts receivable		10000

Solution 2b:

Balance of allowance for uncollectible account = $12500 -$10000 = $2,500 credit

Solution 3a:

2022	Allowance for uncollectible accounts	15000
	Accounts receivable		15000

Solution 3b:

Balance of allowance for uncollectible account = $12500 -$15000 = $2,500 Debit