Bonita Company estimates uncollectible accounts using the allowance method at De
ID: 2524047 • Letter: B
Question
Bonita Company estimates uncollectible accounts using the allowance method at December 31. It prepared the following aging of receivables analysis. Days Past Due Total Current 1 to 30 31 to 60 61 to 90 Over 90 Accounts receivable $110,000 68,000 17,000 10,000 8,000 7,000 Percent uncollectible 1% 2% 5% 8% 13%
a. Estimate the balance of the Allowance for Doubtful Accounts using the aging of accounts receivable method.
b. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $550 credit.
c. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $300 debit.
Explanation / Answer
Accounts receivable
aAccounts receivable
Percent uncollectible (%) Not due: 68,000 x 1% = 680 1 to 30: 17,000 x 2% = 340 31 to 60: 10,000 x 5% = 500 61 to 90: 8,000 x 8% = 640 Over 90: 7,000 x 13% = 910 Estimated balance of allowance for uncollectibles 3070 credit Balance of the Allowance for Doubtful Accounts =$3070 b Date General Journal Debit Credit 31-Dec Bad debts expense 2,520 =3070-550 Allowance for doubtful accounts 2,520 31-Dec Bad debts expense 3,370 =3070+300 Allowance for doubtful accounts 3,370