Question

Kiley Company had a $900 credit balance in Allowance for Doubtful Accounts at December 31, 2005, before the current year's provision for uncollectible accounts. An aging of the accounts receivable revealed the following:

Estimated Percentage
Uncollectible
Current Accounts	$120,000	1%
1-30 days past due	12,000	3%
31-60 days past due	10,000	6%
61-90 days past due	5,000	12%
Over 90 days past due	8,000	30%
Total Accounts Receivable	$155,000

Instructions
Please identify each of your answers with the letter of the transactions you are journalizing.
(a)Prepare the adjusting entry on December 31, 2005, to recognize bad debts expense.
(b)Assume the same facts as above except that the Allowance for Doubtful Accounts account had a $700 debit balance before the current year's provision for uncollectible accounts. Prepare the adjusting entry for the current year's provision for uncollectible accounts.
(c)Assume that the company has a policy of providing for bad debts at the rate of 1% of sales, that sales for 2005 were $500,000, and that Allowance for Doubtful Accounts had a $550 credit balance before adjustment. Prepare the adjusting entry for the current year's provision for bad debts.

Answer 1

	Current accounts			uncollec	Estimated		estimated
					percentage		baddebts
	Current accounts			120,000	1%		1200
	1---30 days past due			12,000	3%		360
	31---60 days past due			10,000	6%		600
	61---90 days past due			5,000	12%		600
	over 90 days past due			8,000	30%		2400
	total account receivable			155,000			5160
	Journal Entries
	No	Account titles & explanations				Debit	Credit
	a)	Bad debts expense				4260
		Allowance for uncollectible accounts					4,260
		(5160-900)
	b)	Bad debts expense				5860
		Allowance for uncollectible accounts					5,860
		(5160+700)
	c)	Bad debts expense				5000
		Allowance for uncollectible accounts					5,000
		(500,000*1%)