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:
|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|
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.
|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|
|No||Account titles & explanations||Debit||Credit|
|a)||Bad debts expense||4260|
|Allowance for uncollectible accounts||4,260|
|b)||Bad debts expense||5860|
|Allowance for uncollectible accounts||5,860|
|c)||Bad debts expense||5000|
|Allowance for uncollectible accounts||5,000|
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