Q1) Montgomery Burns Company had a $700 credit balance in Allowance for Doubtful Accounts at December 31, 2001, before current years (2001) provision for uncollectible accounts. Aging of accounts receivable revealed following:
| |
|
Estimated Percentage Uncollectible |
| Current Accounts |
$120,000 |
1% |
| 1 -30 days past due |
12,000 |
3% |
| 31 - 60 days past due |
10,000 |
6% |
| 61 - 90 days past due |
5,000 |
12% |
| Over 90 days past due |
8,000 |
30% |
| Total Accounts Receivable |
$155,000 |
|
(a) Suppose that company uses percentage of receivables allowance method, make adjusting entry on December 31, 2001, to identify bad debts expenses.
(b) Suppose same facts as above except that Allowance for Doubtful Accounts account had $500 debit balance before current year's provision for uncollectible accounts. Again, make adjusting entry on December 31, 2001, to identify bad debts expenses.