Aging Method On January 1, 2019, Smith, Inc., has the following balances for acc
ID: 2549846 • Letter: A
Question
Aging Method
On January 1, 2019, Smith, Inc., has the following balances for accounts receivable and allowance for doubtful accounts:
During 2019, Smith had $2,850,000 of credit sales, collected $2,905,000 of accounts receivable, and wrote off $3,850 of accounts receivable as uncollectible. At year end, Smith performs an aging of its accounts receivable balance and estimates that $3,800 will be uncollectible.
Required:
1. Calculate Smith's preadjustment balance in accounts receivable on December 31, 2019.
$
2. Calculate Smith's preadjustment balance in allowance for doubtful accounts on December 31, 2019.
$
3. Prepare the necessary adjusting entry for 2019.
Accounts Receivable $381,000 Allowance for Doubtful Accounts (a credit balance) 3,900Explanation / Answer
1. Calculate Smith's preadjustment balance in accounts receivable on December 31, 2019
Account receivable = (381000+2850000-2905000-3850) = 322150
2. Calculate Smith's preadjustment balance in allowance for doubtful accounts on December 31, 2019
Allowance for doubtful accounts = 3900-3850 = 50
3) Adjusting entry :
Date accounts & explanation debit credit Bad Debt Expense (3800-50) 3750 Allowance for Doubtful Accounts 3750 (Record adjusting entry for bad debt expense estimate)