Ingles Company has accounts receivable of $118,100 at March 31. An analysis of t
ID: 2351654 • Letter: I
Question
Ingles Company has accounts receivable of $118,100 at March 31. An analysis of the accounts shows the following.Month of Sale Balance, March 31
March $80,500
February 19,100
January 9,400
Prior to January
9,100
$118,100
Credit terms are 2/10, n/30. At March 31, Allowance for Doubtful Accounts has a credit balance of $1,400 prior to adjustment. The company uses the percentage-of-receivables basis for estimating uncollectible accounts. The company's estimate of bad debts is as follows.
Age of Accounts
Estimated Percentage
Uncollectible
1-30 days 3.0%
31-60 days 6.0%
61-90 days 32.0%
Over 90 days 53.0%
Determine the total estimated uncollectibles.
$
Prepare the adjusting entry at March 31 to record bad debts expense.
Date Description/Account Debit Credit
Mar. 31
Explanation / Answer
Calculate the amount for each time period. For example for March it will be the percentage for 1-30 days, 4%. (March Sales x 4%) Once you have found each of those amounts, total them. Subtract out the existing balance of the Allowance for Doubtful Accounts and this is the amount of your adjustment. Your ending balance of ADA should be the total you came up with (credit balance).