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Cedar Mill, Inc. uses the Aging of Accounts Receivable method for estimating uncollectible accounts. The accounting...

Cedar Mill, Inc. uses the Aging of Accounts Receivable method for estimating uncollectible accounts. The accounting records show the following information at the end of the year:

Number of Days Unpaid
0 - 30 31 - 60 61 - 90 Over 90
Accounts Receivable $ 740,000 $ 480,000 $ 220,000 $ 160,000
Estimated % Uncollectible 5 % 10 % 15 % 25 %

If the unadjusted credit balance in the Allowance for Doubtful Accounts account before is $30,000, what would be the amount of the adjustment for bad debts?

Multiple Choice

  • $158,000

  • $90,000

  • $69,000

  • $128,000

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Homework Answers

Answer #1

Adjustment for bad debts= Allowance for bad debts- unadjusted credit balance in the Allowance for Doubtful Accounts

Allowance bad debts for the year

Accounts receivable Estimated % of uncollectables Bad debts
740000 5 37000
480000 10 48000
220000 15 33000
160000 25 40000
Bad debts expenses 158000

As there is no balance of allowance for bad dests is given in the question , bad debts expenes will be the allownace for bad debts balance.

Adjustment for bad debts= Allowance for bad debts- unadjusted credit balance in the Allowance for Doubtful Accounts

=158000-30000

= $ 128000

Option 4 has to be selected

Pls do rate, if the answer is correct and comment, if any further assistance is required

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