Question

Jarden Company has credit sales of $3,000,000 for year 2017. On December 31, 2017, the company’s Allowance for Doubtful Accounts has an unadjusted credit balance of $18,424. Jarden prepares a schedule of its December 31, 2017, accounts receivable by age. On the basis of past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here.

December 31, 2017 Accounts Receivable		Age of Accounts Receivable	Expected Percent Uncollectible
$	600,000	Not yet due	0.90	%
	240,000	1 to 30 days past due	1.65
	48,000	31 to 60 days past due	6.15
	24,000	61 to 90 days past due	31.00
	4,800	Over 90 days past due	64.00

Required:
1. Estimate the required balance of the Allowance for Doubtful Accounts at December 31, 2017, using the aging of accounts receivable method.

	Accounts Receivable		Percent Uncollectible (#.##%)		Estimated Uncollectible
Not due:		x		=
1 to 30:		x		=
31 to 60:		x		=
61 to 90:		x		=
Over 90:		x		=
Estimated balance of allowance for uncollectibles

Record the estimated bad debts.

Date	General Journal	Debit	Credit
Dec 31

Answer 1

Ans.1	Age of accounts receivables	Accounts receivables (a)	Percent Uncollectible(b)	Est. uncollectible (a*b)
	Not due	600000	0.90%	5400
	1 to 30	240000	1.65%	3960
	31 to 60	48000	6.15%	2952
	61 to 90	24000	31%	7440
	Over 90	4800	64%	3072
	Estimated balance of allowance for uncollectibles			22824
Ans.2	Estimated balance of allowance for uncollectibles		22824
	Less: Credit balance of allowance for doubtful accounts		-18424
	Bad debts expenses		4400
	Date	General journal	Debit	Credit
	31-Dec	Bad debts expenses	4400
		Allowance for doubtful accounts		4400
	*Allowance for doubtful accounts has a credit balance, the estimated doubtful accounts has increased so
	the allowance account will be credited to the bad debts expenses account.