Question

Baltimore Company uses aging to estimate uncollectibles. At the end of the fiscal year, December 31, 2018, Accounts Receivable has a balance that consists of:

Dollar Value                          Age of Account                Estimated Collectible

$180,000                              < 30 days old                              99%

70,000                                 30 to 60 days old                         93%

35,000                                 61 to 120 days old                       79%

12,000                                 > 120 days old                             20%

The current unadjusted Allowance for Uncollectible Accounts balance is a debit balance of $2,000 and the Bad Debt Expense accounts has an unadjusted balance of zero. After the adjusting entry is made, what will be the dollar balances in the Allowance for Doubtful Accounts? Round to nearest whole dollar.

Answer 1

Balance in Allowance for Doubtful Accounts= $23,650

Working

					Total
Receivables value	$ 1,80,000.00	$ 70,000.00	$ 35,000.00	$ 12,000.00
Collectable %	99%	93%	79%	20%
Uncollectable %	1%	7%	21%	80%
Amount of provision	$        1,800.00	$    4,900.00	$    7,350.00	$    9,600.00	$ 23,650.00

Adjusting entry required for recording bad debts expense for the period

Accounts	Debit	Credit
Bad debts expense	$ 25,650
Allowance for Uncollectible Accounts		$ 25,650
(To record bad debts expense)

Total balance in uncollectable accounts should be $23,650 (credit) since the unadjusted balance is $2000 there should be a credit of $(23650+2000) to make balance equal to $23650.