Aging accounts receivable and accounting for bad All its December 31, 2017, ull
ID: 2580886 • Letter: A
Question
Aging accounts receivable and accounting for bad All its December 31, 2017, ull of receivables in each age category that wl May Expected Percent Uncollectible P2 P3 Age of Accounts Receivable Not yet due 1 to 30 days past due 31 to 60 days past due 61 to 90 days past due Over 90 days past due December 31, 2017, 1.25% Accounts Receivable $830,000 254,000 86,000 38,000 12,000 2.00 6.50 32.75 68.00 July Aug Sep. ov Nov Required 1. Estimate the required balance of the Allowance for Doubtful Accounts at December 31, 2017 the aging of accounts receivable method. 2. Prepare the adjusting entry to record bad debts expense at December 31, 2017. Analysis Component 3. On Rea Check (2) Dr. Bad Debts Expense, $27.150 An June 30, 2018, Jarden Company concludes that a customer's $4,750 receivable uncollectible and that the account should be written off. What effect will this action ha ve on Jarden 2. 2018 net income? Explain. Problem 9-4A Accounts receivable transactions and bad debts adjustments C1 P2 P3 Liang Company began operations on January 1,2016. During its first two years, the company complea a number of transactions involving sales on credit, accounts receivable collections, and bad debt,Ther transactions are summarized as follows: 2016 a. Sold $1.345,434 of merchandise (that had cost $975,000) on credit, terms n/30 b. Wrote off $18,300 of uncollectible accounts receivable, c. Received $669,200 cash in payment of accounts receivable Check (d) Dr. Bad Debts Expense, $28,169 d. In adjusting the accounts on December 31, the company estimated that 1.5% of accounts receivable will be uncollectible.Explanation / Answer
.1. Required balance of the Allowance for Doubtful Accounts at December 31, 2017
Age category
Amount
Expected percent
Uncollectable
Uncollectable
Amount
Not yet due
$830,000
1.25%
$10,375
1-30 days
$254,000
2%
$5,080
31-60 days
$86,000
6.50%
$5,590
61-90 days
$38,000
32.75%
$12,445
Over 90 days
$12,000
68.00%
$8,160
TOTAL
$41,650
Required balance of the Allowance Doubtful Accounts at December 31, 2017=$41,650
.2. Adjusting Entry
JOURNAL ENTRY
Date
Account Titles and explanation
Debit
Credit
December31,2017
Bad debt Expenses
$41,650
Allowance for doubtful accounts
$41,650
(To record the bad debt)
.3. Under Direct write off method, uncollectible amount of $4,750 will be directly written off by crediting Accounts receivable and debiting Bad debt expenses.
Under this method Net Income of 2018 will be reduced by $4,750
Under the allowance method, Account receivable will be credited by $4,750 and Allowance for doubtful accounts will be debited by $4,750
It will not affect Income Statement of 2018. It will affect only Balance Sheet accounts
There will be no change in Net income of 2018.
Age category
Amount
Expected percent
Uncollectable
Uncollectable
Amount
Not yet due
$830,000
1.25%
$10,375
1-30 days
$254,000
2%
$5,080
31-60 days
$86,000
6.50%
$5,590
61-90 days
$38,000
32.75%
$12,445
Over 90 days
$12,000
68.00%
$8,160
TOTAL
$41,650