Question

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

Daley Company estimates uncollectible accounts using the allowance method on 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 \$ 570,000 \$ 396,000 \$ 90,000 \$ 36,000 \$ 18,000 \$ 30,000 Percent uncollectible 1 % 2 % 5 % 7 % 10 % a. Estimate the balance of the Allowance for Doubtful Accounts assuming the company uses 4.5% of total accounts receivable to estimate uncollectible, instead of the aging of receivables method

1Estimate the balance of the Allowance for Doubtful Accounts assuming the company uses 4.5% of total accounts receivable to estimate uncollectible, instead of the aging of receivables method.

Estimated balance of the allowance for uncollectible

B. & 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:

i) \$12,000 credit

ii) \$1,000 debit

• Record estimated bad debts assuming that Allowance for Doubtful Accounts has a \$12,000 credit balance.
• Record the adjusting entry for bad debts assuming that Allowance for Doubtful Accounts has a \$1,000 debit balance.

1) the balance of the Allowance for Doubtful Accounts = Accounts receivable at end * % of uncollectible

= 570000* 4.5%

= \$ 25650

2)

 Date Account title Debit credit i) Bad debt expense 13650 Allowance for Doubtful Accounts   (25650-12000) 13650 ii) Bad debt expense 26650 Allowance for Doubtful Accounts [25650-(-1000)] 26650 [Being bad debt expense recorded 25650+1000]