Cou Company uses the a ng approach t estimate bad debt expense. The endng balanc
ID: 2340709 • Letter: C
Question
Cou Company uses the a ng approach t estimate bad debt expense. The endng balance of each acontraceivable s aged on the b of throo tme periods as blos:Unrmee,ono, p 120 days past due, $55,000, and (3) more than 120 days past due, $25.,000. Experience has shown that for each age group, the average loss rate on the amount of the recealvables at year end due to uncollectbility is (1) made. 3.5 percent, (2) 12 percent, and (3) 30 percant, respectively. At December 31, the and of the current yeer, the Allowance for Doubtiul Accounts balance i $200 (credt) before the end-of-period adjusting entry Requlred: 1 P pare the a roprate bad debt expense ad at ng ur al e try for the ar ent year. If no entry wroquired for a transaction ent, select 10 our al entry equired in the first account field. Journal entry worksheet Record the adjusting journal entry for bad debt expense. Note: Ester debits befene View general journal Record entry (Amounts to be deducted should be indicated by a minus sign) 2. Show how the various accounts related to accounts receivable should be shown on the December 31, current year, balance shee. CHOU COMPANY Partial Balance Sheet MacBook AirExplanation / Answer
Answer
Account receivables
% Uncollectible
Amount of Receivable estimated to be uncollectible
Not yet due
$ 279,000.00
3.5%
$ 9,765.00
Upto 120 days
$ 55,000.00
12.0%
$ 6,600.00
More than 120 days
$ 25,000.00
30.0%
$ 7,500.00
Total
$ 359,000.00
$ 23,865.00
Above analysis table shows that by the end of year $ 23,865 of Accounts receivables are estimated to be uncollectible. This means that adjusted balance of Allowance for Doubtful Accounts MUST BE equal to $ 23,865. Any adjustment made to the Allowance account is made through Bad Debt Expenses account.
A
Unadjusted Balance in Allowance account
$ 200.00 Credit
B
Adjusted Balance required
$ 23,865.00 Credit
C = B - A
Amount of Bad Debt Expenses
$ 23,665.00 to be adjusted in Allowance Account
Date
General Journal
Debit
Credit
Dec-31
Bad Debt Expenses
$ 23,665.00
Allowances for Doubtful Account
$ 23,665.00
(Bad Debt expense recorded)
Partial Balance Sheet
As of December 31
Current Assets:
Accounts receivables
$ 359,000.00
Less: Allowance for Doubtful Accounts
$ 23,865.00
Accounts receivables, net of allowance for doubtful accounts
$ 335,135.00
Account receivables
% Uncollectible
Amount of Receivable estimated to be uncollectible
Not yet due
$ 279,000.00
3.5%
$ 9,765.00
Upto 120 days
$ 55,000.00
12.0%
$ 6,600.00
More than 120 days
$ 25,000.00
30.0%
$ 7,500.00
Total
$ 359,000.00
$ 23,865.00