Question

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.

Answer 1

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]