Question

Motown Corporation reviews its estimate of uncollectible accounts and determines a change is necessary based on the following:
% of Ending Accounts Receivable method used

20X6 estimate of accounts receivable that will be uncollectible 13.00%

Revised estimate for 20X7 accounts receivable that will be uncollectible 10.00%

Total Balance in Accounts Receivable at 1/1/X7 435,000 $

Total Balance in Accounts Receivable at 12/31/X7 650,000 $

Balance in the Allowance for Doubtful Accounts at 1/1/X7 12,500 $ CREDIT

Calculate the amount of uncollectible accounts to be recorded for the 20X7 adjusting journal entry:

Answer 1

Amount of uncollectible accounts to be recorded will be the amount of uncollectible amount calculated based on the percentage of the accounts receivable . From this amount any credit amount of allowance for doubtful accounts will be reduced as this amount is already been provided in the uncollectible accounts in the Last year.

Uncollectible amount for 20X7

= 650,000*10%

= 65,000

Credit balance in allowance for doubtful accounts

= $12,500

Therefore amount of uncollectible accounts to be recorded

= 65,000 - 12,500

= $52,500.