Cypress Co has given you the following information from its aging of Accounts Re
ID: 2431442 • Letter: C
Question
Cypress Co has given you the following information from its aging of Accounts Receivable. Using this information, determine the amount of Using this information, determine the amount of the journal entry to record the estimated uncollectible accounts Current 31-60 days 6,000 6% uncollectible 61-90days 2.700 10% uncollectible $23,000 2% uncollectible 91 and up 1.700 18% uncollectible The current balance in Allowance for Doubtful Accounts is a $144 debit O A. $1,252 O B. $46,000 O C. $1,396 D. $1,540 Click to select your answer here to searchExplanation / Answer
Solution: The correct option is “A” i.e $ 1252 (see working notes below)
Working Notes
Total of age group
Percentage
Considered
Uncollectible
Estimated
Uncollectible
accounts
Current
$ 23,000
2%
$ 460
31-60 days
$ 6000
6%
$ 360
61-90 days
$ 2700
10 %
$ 270
91 and up
$ 1700
18 %
$ 306
$ 1396
2) Adjusting entry at the end of the period: As per the above calculation the total estimated uncollectible amount at the end of the year is $ 1396 which represents the required balance in allowance for doubtful accounts at the end of the period.
Since the company already has a balance of $ 144 in allowance for doubtful accounts, the year end entry for adjustment purposes will be made for $ 1252( $1396-$144).
Adjusting entry is as follows:
Uncollectible accounts expense a/c------Dr $1252
To Allowance for doubtful accounts---------------$ 1252
Total of age group
Percentage
Considered
Uncollectible
Estimated
Uncollectible
accounts
Current
$ 23,000
2%
$ 460
31-60 days
$ 6000
6%
$ 360
61-90 days
$ 2700
10 %
$ 270
91 and up
$ 1700
18 %
$ 306
$ 1396
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