Adventure Company Uses the Aging of Accounts Receivable Method to Estimate

question 119

Essay

Adventure Company uses the aging of accounts receivable method to estimate Bad Debt Expense.The balance of each account receivable is aged on the basis of three categories as follows: (1)1-30 days old,(2)30-90 days old,and (3)more than 90 days old.Based on experience,management has estimated what portion of receivables of a specific age will not be paid as follows: (1)1%,(2)15%,and (3)40%,respectively.
At December 31,2016,the unadjusted credit balance in the Allowance for Doubtful Accounts was $100.The total Accounts Receivable in each age category were: (1)1-30 days old,$65,000,(2)30-90 days old,$10,000,and (3)more than 90 days old,$4,000.
Required:
Part a.Calculate the estimate of uncollectible accounts at December 31,2016.
Part b.Prepare the appropriate adjusting entry dated December 31,2016.

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Definitions:

True Harm

Actual, tangible damage or injury that can be demonstrated and quantified.

Henry Shue

An American philosopher and professor known for his work in the field of international ethics, human rights, and climate justice.

Recognized Hazards

Refers to dangerous conditions or substances that are known, or should have been known, to cause harm to employees in the workplace.

General Duty Clause

A provision in the Occupational Safety and Health Act requiring employers to provide a work environment free from recognized hazards that can cause death or serious physical harm.