Question

Johnson Company calculates its allowance for uncollectible accounts as 10% of its ending balance in gross accounts receivable. The allowance for uncollectible accounts had a credit balance of $13,000 at the beginning of 2021. No previously written-off accounts receivable were reinstated during 2021. At 12/31/2021, gross accounts receivable totaled $216,700, and prior to recording the adjusting entry to recognize bad debts expense for 2021, the allowance for uncollectible accounts had a debit balance of 23,800.

Required:
1. What was the balance in gross accounts receivable as of 12/31/2020?
2. What journal entry should Johnson record to recognize bad debt expense for 2021?
3. Assume Johnson made no other adjustment of the allowance for uncollectible accounts during 2021. Determine the amount of accounts receivable written off during 2021.
4. If Johnson instead used the direct write-off method, what would bad debt expense be for 2021?

2.

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

1. Accounts not yet due = $450,000; estimated uncollectible = 5%.
2. Accounts 1–30 days past due = $56,300; estimated uncollectible = 9%.
3. Accounts 31–90 days past due = $45,000; estimated uncollectible = 13%
4. Accounts more than 90 days past due = $33,800; estimated uncollectible = 17%.

At 12/31/2021, before recording any adjustments, Zuo has a credit balance of $23,400 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

Solution 1: Johnson Company:

1.

allowance account at the beginning of 2021.	13000
Divided by: % of ending accounts receivable	10%
balance in gross accounts receivable as of 12/31/2020	130000

2.

Date	General Journal	Debit	Credit
31-Dec-21	Bad debt expense (216700*10% + 23800)	45470
	Allowance for uncollectible accounts		45470

3.

Allowance account at the beginning of 2021.	13000
Less: Unadjusted Allowance account at the end	-23800
Accounts receivable written off	36800

4.

If Direct method:
bad debt expense be for 2021	36800