Question

Presented below is information related to the Accounts Receivable accounts of Monty Inc. during the current year 2017.

1. An aging schedule of the accounts receivable as of December 31, 2017, is as follows.

Age		Net Debit Balance			% to Be Applied after Correction Is Made
Under 60 days		$170,200			1%
60–90 days		135,900			4%
91–120 days		39,200	*		5%
Over 120 days		22,900			$3,400 definitely uncollectible; estimated remainder uncollectible is 27%
		$368,200

*The $3,000 write-off of receivables is related to the 91-to-120 day category

2. The Accounts Receivable control account has a debit balance of $368,200 on December 31, 2017.

3. Two entries were made in the Bad Debt Expense account during the year: (1) a debit on December 31 for the amount credited to Allowance for Doubtful Accounts, and (2) a credit for $3,000 on November 3, 2017, and a debit to Allowance for Doubtful Accounts because of a bankruptcy.

4. Allowance for Doubtful Accounts is as follows for 2017.

Allowance for Doubtful Accounts
Nov. 3		Uncollectible accounts written off		3,000	Jan. 1		Beginning balance		8,800
					Dec. 31		5% of $368,200		18,410

5. A credit balance exists in the Accounts Receivable (60–90 days) of $4,600, which represents an advance on a sales contract.

Assuming that the books have not been closed for 2017, make the necessary correcting entries. (Round answers to 0 decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2017
	(To correct bad debt expense and write off accounts receivable)
Dec. 31, 2017
	(To reclassify credit balance in accounts receivable)
Dec. 31, 2017
	(To write off uncollectible accounts)
Dec. 31, 2017
	(To reduce allowance for doubtful account balance)

Answer 1

Solution :

Age	Net Debit Balance	% Uncontrollable	Allowance Balance
0-60 Days	$170,200	1 %	$ 1702
61-90 Days	$ 135,900 + $4,600	4 %	$ 5620
90-120 Days	$ 39,200-$3,000	5 %	$ 1810
Over 120 Days	$ 22,900-$3,400	27 %	$ 5265
TOTAL	$ 3,61,800		$ 14,397

Entries:

Date	Particulars	LF	Debit	Credit
Dec. 31, 2017	Bad Debt Expense Dr		$3,000
	To Accounts Receivable			$3,000
	(To correct bad debt expense and write off accounts receivable)
Dec. 31, 2017	Accounts Receivable Dr		$4,600
	To Advance on Sales Contract			$4,600
	(To reclassify credit balance in accounts receivable)
Dec. 31, 2017	Allowances for Doubtful Debts Dr		$3,400
	To Accounts Receivable			$3,400
	(To write off uncollectible accounts)
Dec. 31, 2017	Allowances for Doubtful Debts   Dr		$6,413
	To Bad Debt Expense			$6,413
	(To reduce allowance for doubtful account balance)

Balance of Allowance for Debts =$ 8800+$ 18410-$ 3000-$ 3400 = $ 20,810

Less: Corrected Balance = $ 14,397

Adjusted Bad Debts Expenses = $ 6,413