Adventure Company uses the aging of accounts receivable method to estimate Bad D

Question

Adventure Company uses the aging of accounts receivable method to estimate Bad Debt Expense. The balance of each account receivable is aged on the basis of three categories as follows: (1) 1-30 days old, (2) 30-90 days old, and (3) more than 90 days old. Based on experience, management has estimated what portion of receivables of a specific age will not be paid as follows: (1) 2%, (2) 13%, and (3) 37%, respectively. At December 31, 2016, the unadjusted credit balance in the Allowance for Doubtful Accounts was $180. The total Accounts Receivable in each age category were: (1) 1-30 days old, $66,000, (2) 30-90 days old, $19,000, and (3) more than 90 days old, $6,000 Required: a. Calculate the estimate of uncollectible accounts at December 31, 2016. Estimated uncollectible accounts b. Prepare the appropriate adjusting entry dated December 31, 2016. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list View journal entry worksheet No Date General Journal Debit Credit December 31, 2016 'No Transaction Recorded

Explanation / Answer

Calculate estimated uncollectible accounts :

Total estimated uncollectible amount = 6010

b) Adjusting entry :

Days Amount % Estimated uncollectible 1-30 days 66000 2% 1320 30-90 days 19000 13% 2470 More than 90 days 6000 37% 2220 Total 6010

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