Question

Revise your worksheet to reflect these updated assumptions then answer the questions that follow.

You have been provided with the following Aging Report to use to adjust the Allowance for Uncollectible Accounts for a company at year end.

Age Group	Accounts Receivable					Estimated Percent Uncollectible
Not yet due		$	102,000				5	%
1-30 days past due			46,000				10	%
31-60 days past due			40,000				20	%
61-90 days past due			34,000				40	%
Over 90 days past due			24,000				80	%
		$	246,000

Allowance for Uncollectible Accounts	2,700	Credit

After reviewing the data, you note the 'not yet due' category is overstated by 20%, while the 'Over 90 days' category is understated by 20%, (this error also caused the AR balance on the schedule to not equal the amount of Accounts Receivable on the balance sheet).

Also, you note the balance in the Allowance account is actually a debit, rather than a credit. Being that the normal balance for this account is a credit, the accountant hadn't noticed the issue.

Required:
1. Use your spreadsheet to recalculate the needed adjustment and account balances. What will be the balance in Accounts Receivable and the Allowance for Uncollectible Accounts based on the above information?

2. Prepare the journal entry to adjust the Allowance for Uncollectible Accounts, using your corrected data. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Solution 1:

Age Group	Accounts Receivable	% uncollectible	Uncollectibles
Not yet due (102000/120%)	85,000	5%	4250
1-30 days past due	46,000	10%	4600
31-60 days past due	40,000	20%	8000
61-90 days past due	34,000	40%	13600
Over 90 days past due (24000*120%)	28,800	80%	23040
Total	2,33,800		53490
Balance in Accounts Receivable =	2,33,800
Allowance for Uncollectible Accounts =	53490

Solution 2:

Accounts Title	Debit	Credit
Bad Debt Expense (53490+2700)	56190
Allowance for Uncollectible accounts		56190