Question

Dhaliwal Digital categorizes its accounts receivable into three age groups for purposes of estimating its allowance for uncollectible accounts. Accounts not yet due = $216,000; estimated uncollectible = 20%. Accounts 1–45 days past due = $30,000; estimated uncollectible = 25%. Accounts more than 45 days past due = $12,000; estimated uncollectible = 30%. Before recording any adjustments, Dhaliwal has a debit balance of $54,100 in its allowance for uncollectible accounts.

Required: 1. Estimate the appropriate 12/31/2021 balance for Dhaliwal’s allowance for uncollectible accounts.

2. What journal entry should Dhaliwal record to adjust its allowance for uncollectible accounts?

Answer 1

• Working

Number of Days	Receivables
Past Due	Amount	% uncollectible	Uncollectible amount
Not Due	$216,000	20%	$43,200
1-45	$30,000	25%	$7,500
Over 45 days	$12,000	30%	$3,600
Adjusted balance required of Allowance for Doubtful Account (A)			$54,300
Unadjusted balance in the Allowance account- Credit (Debit) (B)			($54,100)
Uncollectible account expense : (A - B) [54300 + 54100]			$108,400

• Requirement 1:
  The appropriate 12/31/2021 balance for Dhaliwal’s allowance for uncollectible accounts = $ 54,300 Credit
• Requirement 2

Accounts title	Debit	Credit
Bad Debt Expense [or Uncollectible account expense]	$108,400
Allowance for Uncollectible account		$108,400