A Company Has the Following Unadjusted Account Balances at December

question 24

Essay

A company has the following unadjusted account balances at December 31,of the current year; Accounts Receivable of $185,700 and Allowance for Doubtful Accounts of $1,600 (credit balance).The company uses the aging of accounts receivable to estimate its bad debts.The following aging schedule reflects its accounts receivable at the current year-end:
$$\begin{array} { l l l } &&\text { Estimated } \\&&\text { Uncollectible } \\\text { Account Age }&\text { Balance }&\text { Percentage }\\\hline \text { Current (not yet due) } & \$ 96,000& 1.0 \% \\\text { 1-30 days past due } &6 4 , 0 0 0 & 2.5 \% \\\text { 30-60 days past due } &16,000& 11.0 \% \\61 - 90 \text { days past due } & 6,500 & 37.0 \% \\\text { Over 90 days past due } &3 , 2 0 0 & 70.0 \% \\\text { Total } & \underline { \$185,700 } &\end{array}$$
1.Calculate the amount of the Allowance for Doubtful Accounts that should appear on the December 31,of the current year,balance sheet.
2.Prepare the adjusting journal entry to record bad debts expense for the current year .

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Definitions:

Private Placement

The sale of securities to a relatively small number of select investors as a way of raising capital.

Angels

Affluent individuals who provide capital for business start-ups, often in exchange for convertible debt or ownership equity.

Wealthy Individuals

Affluent persons with significant disposable income, often targeted by companies or fund managers as potential investors in ventures or high-value products.

Formal Investors

Institutional or accredited investors who officially engage in funding businesses, typically through structured deals involving equity or debt financing.