Question

Flounder Company using an aging method to account for uncollectible accounts. The aging revealed the need for a $32,000 account balance at the end of the period. The beginning-of-period balance was $15,000 and $10,000 in accounts were actually written off during the period. Which of these reflects the correct journal entry to update the allowance account based on the aging analysis? Question options: a) Accounts Receivable: 27,000, Allow. for Uncollectible Accts: 27,000 b) Uncollectible Accts Expense: 27,000, Accounts Receivable: 27,000 c) Uncollectible Accts Expense: 27,000, Allow. for Uncollectible Accts: 27,000 d) Allow. for Uncollectible Accts: 27,000, Accounts Receivable: 27,000

Answer 1

c) Uncollectible Accts Expense: 27,000, Allow. for Uncollectible Accts

The aging method classifies accounts receivable into the groups of different ages. According to this approach, the longer the period for which an account receivable remains outstanding, the lesser are the chances of its collection. The classification of accounts receivable into various age groups is typically known as aging of accounts receivable. The accounting treatment in aging method is to debit uncollectible accounts expense and adjust the balance in allowance for doubtful accounts account to the required amount.