Recording and Reporting a Bad Debt Estimate Using Aging Analysis
Casilda Company uses the aging approach to estimate bad debt expense. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $50,000. (2) up to 180 days past due. $14,000.and (3) more than 180days past due, $4,000.Experience has shown that for each age group, the average loss rate on the amount of the receivables at year-end due to uncollectability
is ( 1) 3 percent, (2) 12 percent, and (3, 30 percent, rcpcctivcly. At December 3 1. 2011 (end of the current year). the Allowance for Doubtful Accounts balance is 5200 (credit) before the end-of- period adjusting entry is made.
Required:
I. Prepare the appropriate bad debt expense adjusting entry for the year 2011.
2. Show how the various accounts related to accounts receivable should be shown on the December 3 1.2011, balance sheet.
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