Question

# Daley Company estimates uncollectible accounts using the allowance method at December 31. It prepared the following...

Daley Company estimates uncollectible accounts using the allowance method at December 31. It prepared the following aging of receivables analysis.

 Days Past Due Total 0 1 to 30 31 to 60 61 to 90 Over 90 Accounts receivable \$ 660,000 \$ 414,000 \$ 108,000 \$ 54,000 \$ 36,000 \$ 48,000 Percent uncollectible 1 % 2 % 5 % 7 % 10 %

a. Estimate the balance of the Allowance for Doubtful Accounts assuming the company uses 6% of total accounts receivable to estimate uncollectibles, instead of the aging of receivables method.
b. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a \$13,800 credit.
c. Prepare the adjusting entry to record bad debts expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a \$2,800 debit.

a) Estimate the balance of the allowance for doubtful accounts = 660000*6% = 39600

b) Estimated allowance for doubtful accounts = (4140+2160+2700+2520+4800) = 16320

 Date account and explanation debit credit Bad debt expense (16320-13800) 2520 Allowance for doubtful accounts 2520 (To record adjusting entry)

c) Estimated allowance for doubtful accounts = (4140+2160+2700+2520+4800) = 16320

 Date account and explanation debit credit Bad debt expense (16320+2800) 19120 Allowance for doubtful accounts 19120 (To record adjusting entry)

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