Aging accounts receivable and accounting for bad debts LO3 LO6 Jarden Company has cre...

Aging accounts receivable and accounting for bad debts LO3 LO6

Jarden Company has credit sales of $3.6 million for year 2010. On December 31, 2010, the company’s

Allowance for Doubtful Accounts has an unadjusted credit balance of $14,500. Jarden prepares a schedule

of its December 31, 2010, accounts receivable by age. On the basis of past experience, it estimates

the percent of receivables in each age category that will become uncollectible. This information is summarized

here.

Required

1. Estimate the required balance of the Allowance for Doubtful Accounts at December 31, 2010, using

the aging of accounts receivable method.

2. Prepare the adjusting entry to record bad debts expense at December 31, 2010.

Analysis Component

3. On June 30, 2011, Jarden Company concludes that a customer’s $4,750 receivable (created in 2010)

is uncollectible and that the account should be written off. What effect will this action have on Jarden’s

2011 net income? Explain.

Check (2) Dr. Bad Debts Expense

$27,150