Part II At its December 31 year-end, a company estimates uncollectible accounts

Question

Part II At its December 31 year-end, a company estimates uncollectible accounts using the allowance method It prepared the folowing aging f receivables analysis. Past Due tal 1 to 30 1 to 90 r 90 Accounts receivable $2,600 $2.000 580 2% 10% 1. (a) Estimate the balance of the Allowance for Doubtful Accounts using the aging of accounts receivable method.(b) Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $10 debit. 2. (a) Estimate the balance of the Allowance for Doubtful Accounts assuming the company uses 2% of total accounts receivable to estimate uncolectibles, instead of the aging of receivables method in number 1. (b) Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $4 credt 3, a> Estimate the balance of the uncollectibles assuming the company uses 0.5% of annual credit sales (annual credit sales were $10,000). (b) Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $2 credt.

Explanation / Answer

1.

(a) Balance of Allowance for Doubtful Accounts = $49

(b)

2(a) Balance of Allowance for Doubtful Accounts = 2% x $2600 = $52

(b)

3(a) Balance of uncollectibles = $10000 x 0.5% = $50

(b)

Days Past Due Total 0 1 to 30 31 to 60 61 to 90 Over 90 Accounts receivable 2600 2000 300 80 100 120 Percent uncollectible 1% 2% 5% 7% 10% Balance of Allowance for Doubtful Accounts 49 20 6 4 7 12

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