Question

Dhaliwal Digital categorizes its accounts receivable into three age groups for purposes of estimating its allowance for uncollectible accounts.

1. Accounts not yet due = $114,000; estimated uncollectible = 5%.
2. Accounts 1–45 days past due = $15,800; estimated uncollectible = 10%.
3. Accounts more than 45 days past due = $6,300; estimated uncollectible = 15%.

Before recording any adjustments, Dhaliwal has a debit balance of $28,400 in its allowance for uncollectible accounts.

Required:
1. Estimate the appropriate 12/31/2021 balance for Dhaliwal’s allowance for uncollectible accounts. Use T accounts when applicable.

Answer 1

Accounts category	Amount due($) (A)	% Uncollectible (B)	Allowance to be made ($) [A*B]
not due	114,000	5%	5,700
1-45 days	15,800	10%	1,580
45+ days	6300	15%	945
Total			8,225

Hence at the end of year 31/12/2021 the balance in Allowance for Uncollectibe accounts are $ 8225.

Allowance for Uncollectibe accounts

31/12/21	To Balance b/d	28,400	31/12/21	By Bad debt expense a/c ( Bal fig)	36,625
31/12/21	To balance b/d (from above)	8,225
		36,625			36,625

Hence Total Balance in Allowance for uncollectible accounts is $ 8225.

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