Carmack Company has credit sales of $2.50 million for year 2015. On December 31,

Question

Carmack Company has credit sales of $2.50 million for year 2015. On December 31, 2015, the company’s Allowance for Doubtful Accounts has an unadjusted credit balance of $15,560. Carmack prepares a schedule of its December 31, 2015, accounts receivable by age. On the basis of past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here.

6.

value:
10.00 points

Required information

Estimate the required balance of the Allowance for Doubtful Accounts at December 31, 2015, using the aging of accounts receivable method. (Round your intermediate calculations and final answer to the nearest dollar amount. Omit the "$" sign in your response.)

December 31, 2015
Accounts Receivable Age of
Accounts Receivable Expected Percent Uncollectible $ 500,000             Not yet due 1.05 % 200,000             1 to 30 days past due 1.80 40,000             31 to 60 days past due 6.30 20,000             61 to 90 days past due 31.75 4,000             Over 90 days past due 66.00

Explanation / Answer

Answer:1 Calculation of the required balance of the Allowance for Doubtful Accounts at December 31, 2015, using the aging of accounts receivable method:

The adjusting entry on December 31, 2015 is:
Debit Bad Debts Expense 4800
Credit Allowance for Doubtful Accounts 4800

31-Dec-15 Age of Expected Percent Uncollectible Accounts Receivable Accounts Receivable Amount ($) Explanation $ 500,000             Not yet due 1.05 % 5250 500000*1.05% 200,000             1 to 30 days past due 1.8 3600 200000*1.8% 40,000             31 to 60 days past due 6.3 2520 40000*6.3% 20,000             61 to 90 days past due 31.75 6350 20000*31.75% 4,000             Over 90 days past due 66 2640 4000*66% Total 20360

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