Daley Company estimates uncollectible accounts using the allowance method at Dec

Question

Daley Company estimates uncollectible accounts using the allowance method at December 31. It prepared the following aging of receivables analysis.

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 $3,600 credit.

c.) 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 $100 debit.

Days Past Due Days Past Due Days Past Due Days Past Due Days Past Due Total 0 1 to 30 31 to 60 61 to 90 Over 90 Accounts receivable $570,000 $396,000 $90,000 $36,000 $18,000 $30,000 Percent uncollectible 1% 2% 5% 7% 10%

Explanation / Answer

SOLUTION

(A)

(B)

(C)

Accounts Receivable ($) (A) Percentage uncollectible (B) Allowance for Doubtful Accounts ($) (A*B) Not due 396,000 1% 3,960 1-30 90,000 2% 1,800 31-60 36,000 5% 1,800 61-90 18,000 7% 1,260 Over 90 30,000 10% 3,000 Total 11,820

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