A company has the following unadjusted account balances at December 31, of the current year; Accounts Receivable of $185,700 and Allowance for Doubtful Accounts of $1,600 (credit balance). The company uses the aging of accounts receivable to estimate its bad debts. The following aging schedule reflects its accounts receivable at the current year-end:Account AgeBalanceEstimated Uncollectible PercentageCurrent (not yet due)$96,0001.0%1-30 days past due64,0002.5%30-60 days past due16,00011.0%61-90 days past due6,50037.0%Over 90 days past due3,20070.0%Total$185,700?1. Calculate the amount of the Allowance for Doubtful Accounts that should appear on the December 31, of the current year, balance sheet.2. Prepare the adjusting journal entry to record bad debts expense for the current year.
What will be an ideal response?
| 1. | $96,000 * | .010 = | $ 960 |
| 64,000 * | .025 = | 1,600 |
| 16,000 * | .110 = | 1,760 |
| 6,500 * | .370 = | 2,405 |
| 3,200 * | .700 = | 2,240 |
| $8,965 |
| 2. |
| Allowance for Doubtful Accounts | 7,365 |
| Desired balance in allowance account: | $ 8,965 credit |
| Current balance in allowance account: | 1,600 credit |
| Amount of adjustment | $ 7,365 credit |
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