Fife Company Has the Following Account Balances at December 31 $$\text { Schedule af Accounts Receivable by Age }$$

question 145

Essay

Fife Company has the following account balances at December 31 of the current year: Accounts Receivable $44,000 and Allowance for Doubtful Accounts $600 (credit balance). Fife uses the aging of accounts receivable to estimate bad debts. The following aging schedule reflects the situation at year-end:
$$\text { Schedule af Accounts Receivable by Age }$$
$\begin{array}{|l|r|r|r|r|r|r|}\hline \begin{array}{r}\text { Customers} \\\text { Name}\end{array} & \text { Total } & \begin{array}{r}\text { Not yet } \\\text { due }\end{array} & \begin{array}{r}{1 - 3 0} \text { days } \\\text { past due }\end{array} & \begin{array}{r}\text { 31-60 days } \\\text { past due }\end{array} & \begin{array}{r}\text { 61-90 days } \\\text { past due }\end{array} & \begin{array}{r}\text { Over 90 } \\\text { days past } \\\text { due }\end{array} \\\hline \text { S. Milken } & 12,000 & 5,000 & 3,000 & 2,000 & 1,000 & 1,000 \\\hline \text { F. Filip } & 7,000 & 1,000 & 2,000 & 1,000 & 800 & 2,200 \\\hline \text { J. Riley } & 14,000 & 8,000 & 3,000 & 2,000 & 100 & 900 \\\hline \text { R. Cash } & 3,000 & 2,000 & 1,000 & & & \\\hline \text { L. Faraday } & 8,000 & 1,000 & 7,000 & & & \\\hline \text { Totals } & 44,000 & 17,000 & 16,000 & 5,000 & 1,900 & 4,100 \\\hline \begin{array}{l}\text { Percent }\end{array} & & 2 \% & 5 \% & 10 \% & 25 \% & 40 \% \\\text { Uncollectible } & & & & & & \\\hline\end{array}$ (1) Calculate the amount of the Allowance for Doubtful Accounts that should appear on the December 31, current year, balance sheet. (2) Prepare the journal entry to record bad debts expense for the current year.

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Definitions:

Par Value

The nominal value of a bond, share of stock, or coupon as stated by the issuer, often used as a legal face value.

Common Stock

Holding shares in a company grants investors a portion of ownership, allowing them to vote on corporate matters and receive a portion of the profits via dividends.

Additional Paid-in Capital

The amount of equity capital that is invested in a company by shareholders over and above the par value of the shares.

Professional Corporation

A type of corporation typically formed by lawyers, doctors, and other professionals, where the company acts under corporate status but allows its members to maintain professional liability.