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Adventure Company uses the aging of accounts receivable method to estimate Bad Debt Expense. The balance...

Adventure Company uses the aging of accounts receivable method to estimate Bad Debt Expense. The balance of each account receivable is aged on the basis of three categories as follows: (1) 1-30 days old, (2) 30-90 days old, and (3) more than 90 days old. Based on experience, management has estimated what portion of receivables of a specific age will not be paid as follows: (1) 2%, (2) 16%, and (3) 36%, respectively. At December 31, 2016, the unadjusted credit balance in the Allowance for Doubtful Accounts was $280. The total Accounts Receivable in each age category were: (1) 1-30 days old, $63,000, (2) 30-90 days old, $19,000, and (3) more than 90 days old, $4,000.

Required:
a. Calculate the estimate of uncollectible accounts at December 31, 2016.


b.

Prepare the appropriate adjusting entry dated December 31, 2016. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

1.Record the adjusting entry on December 31, 2016.
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Answer #1

a. Estimate of uncollectible accounts at December 31, 2016 is as follows:

Ageing of Receivables Method
Due Date Amount Estimate % Uncollectible Estimated Uncollectible
1-30 days $63,000 2% $1,260
30-90 days $19,000 16% $3,040
more than 90 days $4,000 36% $1,440
Total $86,000 $5,740

Estimate of uncollectible accounts at December 31, 2016 is $5,740.

Allowance for uncollectible to be provided during 2016 = Ending balance - beginning balance

= $5,740 - $280

= $5,460

b. journal entry is as follows:

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