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 AgeBalanceEstimated Uncollectible PercentageCurrent (not yet due)$620,0000.5%1-30 days past due270,0002.0%30-60 days past due145,0008.0%61-90 days past due55,00020.0%90-120 days past due32,00050.0%Over 120 days past due18,00070.0%Total$1,140,000?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 credit balance of the Allowance for Doubtful Accounts on January 1 of the current year
was $41,000 and that accounts receivable written off during the current year totaled $43,200.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.
What will be an ideal response?
a.
| Account Age | Balance | Estimated Uncollectible Percentage | ? |
| Current (not yet due) | $620,000 | 0.5% | 3,100 |
| 1-30 days past due | 270,000 | 2.0% | 5,400 |
| 30-60 days past due | 145,000 | 8.0% | 11,600 |
| 61-90 days past due | 55,000 | 20.0% | 11,000 |
| 90-120 days past due | 32,000 | 50.0% | 16,000 |
| Over 120 days past due | 18,000 | 70.0% | 12,600 |
| Total | $1,140,000 | ? | 59,700 |
| b. | Desired balance in allowance account | $59,700 | Credit |
| ? | Balance before adjustment ($41,000 - $43,200) | 2,200 | Debit |
| ? | Adjustment needed | $61,900 | Credit |
| ? | ? | ? | ? |
| c. | Bad Debts Expense | 61,900 | ? |
| ? | Allowance for Doubtful Accounts | ? | 61,900 |
| ? | ? | ? | ? |
| d. | Accounts receivable | $1,140,000 | ? |
| ? | Less allowance for doubtful accounts | 59,700 | ? |
| ? | ? | $1,080,300 | ? |
You might also like to view...
Which of the following is a characteristic of a competitive advantage?
A) It makes the product more accessible for the customers. B) It generates customer value. C) It makes the product more user friendly. D) It increases cost of the product.
The importance on capacity of a person to manage or control oneself—particularly when faced with difficult, yet important tasks is a key component of what theory?
a. Social cognitive theory b. Intrinsic motivation theory c. Social impact theory d. Social role theory
An organization's most important relationships are those with:
A. Customers and other consumers D. Government regulators and inspectors B. Investors and analysts E. Employees and their supervisors C. Neighbors and the larger community
Ludington Corporation provides the following data from a recent period for its manufacture of shoes: direct material costs, $24,000; direct labor costs, $12,000; and total fixed costs, $40,000. Sales were $60,000 based on 12,000 units sold during the period. Calculate the contribution margin and the contribution margin ratio.
What will be an ideal response?