Question

Zuo Software categorizes its accounts receivable into four age groups for purposes of estimating its allowance for uncollectible accounts.

1. Accounts not yet due = $297,000; estimated uncollectible = 15%.
2. Accounts 1–30 days past due = $37,200; estimated uncollectible = 19%.
3. Accounts 31–90 days past due = $29,700; estimated uncollectible = 22%
4. Accounts more than 90 days past due = $22,300; estimated uncollectible = 26%.

At 12/31/2021, before recording any adjustments, Zuo has a credit balance of $30,000 in its allowance for uncollectible accounts.

Required:
1. Estimate the appropriate 12/31/2021 balance for Zuo’s allowance for uncollectible accounts.
2. What journal entry should Zuo record to adjust its allowance for uncollectible accounts?
3. Calculate Zuo’s 12/31/2021 net accounts receivable balance.

Answer 1

· [1]

	Not yet due	1 to 30	31 to 90	More than 90	Total
Accounts receivables	297000	$37,200	$29,700	$22,300	$386,200
Estimated uncollectible (%)	15%	19%	22%	26%
Estimated uncollectible $	$44,550	$7,068	$6,534	$5,798	$63,950

Estimated balance of Allowance account = $ 63950 Credit

· [2]

	Accounts title	Debit	Credit
31-Dec	Bad Debt Expense (or Uncollectible expense)	$33,950
	Allowance for uncollectible accounts ($63950 - 30000 existing)		$33,950
	(to record uncollectible expense)

· [3]

Net Realizable value = $ 386200 total accounts receivables - $ 63950 uncollectible
= $ 322,250