Uncollectible Accounts) Before the adjusting entry at the end of the period: Acc
ID: 2519745 • Letter: U
Question
Uncollectible Accounts) Before the adjusting entry at the end of the period: Accounts Receivable totaled $200,000 and The Allowance Account had a Debit Balance of $5,000. If 1% of net sales ($700,000) are estimated to be uncollectible and the Aging Schedule estimates uncollectible accounts to be $2,000. Calculate the following 1. The Bad Debt Expense using the Aging Method. 2. The balance in the Allowance Account after the adjusting entry using the Percentage of Sales. 3. Net Receivable using Aging Method If the Allowance Account had a Credit Balance of $5,000. 4. Bad Debt Expense using the Percentage of Sales Method The balance in the Allowance Account after the adjusting entry using the Aging Method. 6. Net Receivables using Percentage of Sales
Explanation / Answer
Answers
As per Aging Method, uncollectible balance is $2,000. This means that Allowances Account should have a Credit balance of $2,000 after adjusting entry. Before adjustment however, the Allowance account has a debit balance of $5,000. Hence, it needs to be credited by $2000 + $5000 = $7000 to make its balance $2,000 Credit.
Hence, Bad Debt expenses using Aging Method will be $7,000 debited (equals to Allowances account credited.)
Uncollectible for current year = 1% of $700000 = $7,000
Bad Debt expense will be debited by $7000 and Allowance account will be credited by $7000.
Hence, the balance is allowance account after adjusting entry will be $5000 debit + $7000 credit = $2,000 Credit
Allowance account balance after adjustment using aging method = $2000
Accounts receivables totalled $200000
Net receivables = 200000 – 2000 = $198,000
Bad debt expense = 1% of $700000 = $7,000
After adjusting entry using Aging Method, the balance is the allowance account will have the balance of $2000 CREDIT, which is equal to Uncollectible estimates.
Before adjustment balance = $5000 credit
Credited by Bad debt expense = $7,000
Total Allowance account balance = 7000 + 5000 = $12,000 CREDIT
Receivables balance $200,000
(-) Allowance account $12,000
Net receivables = $188,000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.