Question

Broadway Limited had an $800 credit balance in Allowance for Doubtful Accounts at December 31, 2018,...

Broadway Limited had an $800 credit balance in Allowance for Doubtful Accounts at December 31, 2018, before the current year's provision for uncollectible accounts. An aging of the accounts receivable revealed the following:

                                                                                                         Estimated Percentage

                                                                                                                Uncollectible

       Current Accounts.......................................     $150,000                       1%

       1-30 days past due.....................................         15,000                       3%

       31-60 days past due...................................           8,000                       6%

       61-90 days past due...................................           5,000                     12%

       Over 90 days past due................................           6,000                     30%

       Total Accounts Receivable........................     $184,000

Instructions

(a)   Prepare the adjusting entry at December 31, 2018, to recognize bad debts expense.

(b) Assume the same facts as above except that the Allowance for Doubtful Accounts account had an $800 debit balance before the current year's provision for uncollectible accounts. Prepare the adjusting entry for the current year's bad debts.

Homework Answers

Answer #1

Calculate balance of uncollectible amount :

Amount

Estimated Percentage uncollectible

Estimated uncollectible amount
Current Accounts 150000 1% 1500
1-30 days past due 15000 3% 450
31-60 days past due 8000 6% 480
61-90 days past due 5000 12% 600
Over 90 days past due 6000 30% 1800
Total 184000 4830

(a)   Prepare the adjusting entry at December 31, 2018, to recognize bad debts expense.

Date accounts & explanation debit credit
Bad debt expense (4830-800) 4030
Allowance for doubtful account 4030
(To record adjusting entry)

(b) Prepare the adjusting entry for the current year's bad debts.

Date accounts & explanation debit credit
Bad debt expense (4830+800) 5630
Allowance for doubtful account 5630
(To record adjusting entry)
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