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 Days Past Due Total Accounts receivable Percent uncollectible 1 to 30 31 to 60 61 to 90 Over 90 $570,000 $396,000 $90,000 $36,000 $18,000 $30,000 10% 1% 2% 5% 7% a. Estimate the balance of the Allowance for Doubtful Accounts using the aging of accounts receivable b. Prepare the adjusting entry to record bad debts expense using the estimate from part a. Assume the c. Prepare the adjusting entry to record bad debts expense using the estimate from part a. Assume the method unadjusted balance in the Allowance for Doubtful Accounts is a $3,600 credit. unadjusted balance in the Allowance for Doubtful Accounts is a $100 debit.

Explanation / Answer

A Aging method 0 days 396000 1% 3960 1- 30 Days 90000 2% 1800 31 - 60 Days 36000 5% 1800 61- 90 days 18000 7% 1260 over 90 Days 30000 10% 3000 Total 570000 11820 b) Uncollectible accounts 11820 Less Uncollectible credit balance 3600 Bad debt expense 8220 Bad debt expense 8220             Allowance for doubtful accounts 8220 c) Uncollectible accounts 11820 add Uncollectible debit balance 100 Bad debt expense 11920 Bad debt expense 11920             Allowance for doubtful accounts 11920

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