Question

P9-3A Presented below is an aging schedule for Halleran Company.

What is the weakness of the direct write-off method of reporting bad debt

Problems: Set A 435

expense?

Journalize entries to record transactions related to bad debts.

(LO 2)

		Home	Worksheet.xls Insert Page Layout Formulas Data Review View
P18 fx
	A			B	C	D	E	F	G
1	Customer			Total	Not Yet Due	Number of Days Past Due
2
3						1–30	31–60	61–90	Over 90
4	Anders			$ 22,000		$10,000	$12,000
5	Blake			40,000	$ 40,000
6	Coulson			57,000	16,000	6,000		$35,000
7	Deleon			34,000					$34,000
8	Others			132,000	96,000	16,000	14,000		6,000
9				$285,000	$152,000	$32,000	$26,000	$35,000	$40,000
10	Estimated Percentage Uncollectible				3%	6%	13%	25%	50%
11	Total Estimated Bad Debts			$ 38,610	$ 4,560	$ 1,920	$ 3,380	$ 8,750	$20,000
12

At December 31, 2017, the unadjusted balance in Allowance for Doubtful Accounts is a credit of $12,000.

Instructions

1. (a) Journalize and post the adjusting entry for bad debts at December 31, 2017.

2. (b) Journalize and post to the allowance account the following events and transactions in

   the year 2018.
   (1) OnMarch31,a$1,000customerbalanceoriginatingin2017isjudgeduncollectible. (2) On May 31, a check for $1,000 is received from the customer whose account was

   written off as uncollectible on March 31.

3. (c) Journalize the adjusting entry for bad debts on December 31, 2018, assuming that the

   unadjusted balance in Allowance for Doubtful Accounts is a debit of $800 and the aging schedule indicates that total estimated bad debts will be $31,600.

Answer 1

(a)

Account Titles	Debit	Credit
Bad Debt Expense	$   26,610.00		=38610-12000
Allowance for Doubtful Accounts		$   26,610.00

(b) I have assumed part B as continuation of Part A, so taken Beginning balance as 38610, alternatively beginning balance can be ignored

Allowance for Doubtful Accounts
Accounts Receivable	$     1,000.00	$   38,610.00	Beg Balance
		$     1,000.00	Accounts Receivable
Ending Balance		$   38,610.00

(c)

Account Titles	Debit	Credit
Bad Debt Expense	$   32,400.00		=31600+800
Allowance for Doubtful Accounts		$   32,400.00