A summary of Jarvis Company\'s December 31, 2013, accounts receivable aging sche

ID: 2381689 • Letter: A

Question

A summary of Jarvis Company's December 31, 2013, accounts receivable aging schedule is presented below along with the estimated percent uncollectible for each age group:

Age Group Amount %

0-60 60,000 .5

61-90 22,000 1.0

91-120 3,000 10.0

over 120 1,000 50.0

The allowance for uncollectible accounts had a balance of $1,400 on January 1, 2013. During the year, bad debts of $750 were written off.

Required:

Prepare all journal entries for 2013 with respect to bad debts and the allowance for uncollectible accounts.

Explanation / Answer

PARTICULARS

DEBIT

CREDIT

Bad Debts A/C

750

To Accounts receivable A/C

750

[Recording bad debts.]

Allowance for Bad Debt A/C

750

To Bad Debts A/C

750

[Adjusting bad debts with the allowance.]

Profit-Loss A/C

670

To Allowance for Bad Debt A/C

670

[Adjusting allowance for next year.]

Working Notes:

Expected Bad Debts for 2014 is:
60000*0.5% + 22000*1% + 3000*10% + 1000*50% = $1320

Existing Allowance for Bad Debts = $1400
New Allowance for Bad Debts = Expected Bad Debts + Bad Debts during the year