Question - A company uses the aging of accounts receivable method to estimate its bad debts expense On December 31 of the current year an aging analysis of accounts receivable revealed the following:
|
Account Age
|
Balance
|
Estimated Uncollectible Percentage
|
|
Current (not yet due)
|
$155,000
|
0.5%
|
|
1-30 days past due
|
67,500
|
2.0%
|
|
30-60 days past due
|
36,250
|
8.0%
|
|
61-90 days past due
|
13,750
|
20.0%
|
|
90-120 days past due
|
8,000
|
50.0%
|
|
Over 120 days past due
|
4,500
|
70.0%
|
|
Total
|
$285,000
|
|
Required:
a. Calculate the amount of the Allowance for Doubtful Accounts that should be reported on the current year-end balance sheet.
b. Calculate the amount of the Bad Debts Expense that should be reported on the current year s income statement, assuming that the balance of the Allowance for Doubtful Accounts on January 1 of the current year was $20,500 and that accounts receivable written off during the current year totaled $21,600.
c. Prepare the adjusting entry to record bad debts expense on December 31 of the current year.
d. Show how Accounts Receivable will appear on the current year-end balance sheet as of December 31.