Rigney Inc. uses the allowance method to estimate uncollectible accounts receiva
ID: 1188750 • Letter: R
Question
Rigney Inc. uses the allowance method to estimate uncollectible accounts receivable. The company produced the followind aging of the accounts receivable at year -end. Calculate the total estimated bad debts based on the below information.
b. Prepare the year-end adjusting journal entry to record the bad debts using the aged uncollectible accounts receivable determined in (a). Assume the current balance in allowance for doubtful accounts is a $8,400 debit.
(c) Of the above accounts, $4,700 is determined to be specifically uncollectible. Prepare the journal entry to write off the uncollectible account.
(d) The company collects $4,700subsequently on a specific account that had previously been determined to be uncollectible in (c). prepare the journal entries necessary to restore the account and record the cash collection.
Number of Days OutstandingExplanation / Answer
a.
Estimated bad debts are as below:
Accounts receivable
Percent
Calculations
Estimated bad debts
$73,000
2%
73,000 ×2% =
$1,460
$40,000
5%
40,000 ×5% =
$2,000
$33,900
6%
33,900 ×6% =
$2,034
$17,900
9%
17,900 ×9% =
$1,611
$10,600
21%
10,600 ×21% =
$2,226
Total
$9,331
b.
The required journal entry is as below:
Date
Accounting titles and explanation
P.ref.
Debit
Credit
Bad debts expense
$9,331
Allowance for doubtful accounts
$9,331
To record the estimated amount of uncollectible accounts.
c.
The required journal entry is as below:
Date
Accounting titles and explanation
P.ref.
Debit
Credit
Allowance for doubtful accounts
$4,700
Accounts receivable
$4,700
To record write-off uncollectible
d.
The required journal entry is as below:
Date
Accounting titles and explanation
P.ref.
Debit
Credit
Accounts receivable
$4,700
Allowance for doubtful accounts
$4,700
To record the reverse entry of write-off uncollectible.
Cash
$4,700
Accounts receivable
$4,700
To record collection of account.
Accounts receivable
Percent
Calculations
Estimated bad debts
$73,000
2%
73,000 ×2% =
$1,460
$40,000
5%
40,000 ×5% =
$2,000
$33,900
6%
33,900 ×6% =
$2,034
$17,900
9%
17,900 ×9% =
$1,611
$10,600
21%
10,600 ×21% =
$2,226
Total
$9,331
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