A Company Has the Following Unadjusted Account Balances at December

question 164

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).This 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:
$\begin{array}{|l|c|c|} \hline &&\text {Estimated}\\ &&\text {Uncollectible}\\ \hline \text { Account Age } & \text { Balance } & \text { Percentage}\\\hline \text { Current (notyet due) } &\$96,000&1.0\%\\\hline \text { 1 - 30 days past due} &64,000&3.5\\ \hline\text { 31-60 days past due} &16,000&12.0\\\hline \text { 61-90 } &6,500&42.0\\\hline \text { Over 90 days past due } &3,200&67.0\\ \hline \text { Total } &\$185,700\\ \hline \end{array}$

a.Calculate the amount of the allowance for doubtful accounts that should appear on the December 31 of the current year balance sheet.
b Prepare the adjusting journal entry to record bad debts expense for the current year.

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Definitions:

Long-Term Debt

represents loans and financial obligations lasting more than one year, used by businesses to finance operations, acquisitions, or investments.

Foreign Currency

Currency used in a country other than one's own, representing money that is not domestically issued.

Financial Management

The strategic planning, organizing, directing, and controlling of financial undertakings in an organization or an institution.

Equity Financed

A means of raising capital through the sale of shares in a company, providing investors with ownership interests.