Question

Arundel 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
$200,000	< 30 days old	99.0%
75,000	30 to 60 days old	93.5%
20,000	61 to 120 days old	71.0%
10,000	> 120 days old	18.0%

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

Dollar Value	Age of Account	Estimated Collectibles	Estimated Uncollectibles	Amount
200000	< 30 days old	99.00%	1.00%	2000
75000	30 to 60 days old	93.50%	6.50%	4875
20000	61 to 120 days old	71.00%	29.00%	5800
10000	> 120 days old	18.00%	82.00%	8200
Total	20875

Thus we need to maintain a balance of $20,875 in the allowance for uncollectible account balance

As the current unadjusted balance of Allowance for Uncollectible Balance account is a debit of $2,000, we need to first tranfer this amount to Bad Debt Expense Account and then create a credit balance of $20875 in this account.

After the adjusting entry is made, the dollar balances in the Allowance for Doubtful Accounts would be $20,875.

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