James Taylor Co. has Accounts Receivable of $200,000 at February 28, 20xx. The A

Question

James Taylor Co. has Accounts Receivable of $200,000 at February 28, 20xx. The Allowance for Bad Debts has a $6,000 credit balance. The company has aged the receivables and discovered that $50,000 has not reached the due date, $80,000 is between one and sixty days past the due date and the final $70,000 is over 61 days past the due date. Make the correct end of period adjusting journal entry for bad debt expense assuming 3% of the not yet due receivables are bad; 8% of the between 1-60 day receivables are worthless and 20% of the receivables older than 61 days are worthless and calculate the company’s net accounts receivable that will be reported on the balance sheet.

Explanation / Answer

Answer:

Adjusted Journal Entry :   Allowance for bad debt A/c    Dr.    $6,000

                                     Bad debt A/d                                     Dr.    $15,900

                                              To Account Receivable                                         $21,900

                              ( Being worthless account receivables written off)

Working Note :

Particulars Account Receivable Rate of bad debt Amount of bad debt Amount not due 50,000 3% 1,500 Between one and sixty days 80,000 8% 6,400 Sixty one days or more 70,000 20% 14,000 Totals 200,000 21,900 Less: allowance for bad debts -6,000 Bad debts to be recorded 15,900

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