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skelet666 [1.2K]
3 years ago
10

During 2015, Bears Inc. recorded credit sales of $680,000. Before adjustments at year-end, Bears has accounts receivable of $300

,000, of which $51,000 is past due, and the allowance account had a credit balance of $2,700. Using the aging of receivables approach, what would be the adjustment assuming Bears expects it will not to collect 10% of the amount not yet past due and 24% of the amount past due?Bad Debt Expense 39,840 Allowance for Uncollectible accounts 39,840Allowance for Uncollectible accounts 34,440 Bad Debt Expense 34,440Bad Debt Expense 34,440 Allowance for Uncollectible accounts 34,440Bad Debt Expense 37,14Allowance for Uncollectible accounts 37,140
Business
1 answer:
Rufina [12.5K]3 years ago
8 0

Answer:

Bad Debts Expense                      Debit                  $ 34,440

Allowance for Uncollectible accounts   Credit                          $ 34,440

Explanation:

Computation of amount of uncollectible balances to be recorded

Total accounts Receivable                                    $ 300,000

Accounts past due                                                  <u>$   51,000</u>

Accounts not yet past due                                     $ 249,000

Estimated uncollectible from not yet past due         10 %

Estimated uncollectible from past due                       24 %

Estimated uncollectible from not yet past due 10 % * $ 249,000  = $ 24,900

Estimated uncollectible from past due 24 % * $ 51,000            =     <u>$   12,240</u>

Total Estimated Uncollectible amounts                                            = $ 37,140  

Available balance in Allowance account                                           $   (2,700)

Allowance for uncollectible accounts to be recorded                       <u>$ 34,440</u>

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Explanation:

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Accounts Uncollectible are those credit that the company give and there are not chances of been collected.

When the customers buy products on credits but then the company can't collect the debt, then it's necessary to write off the unpaid bill as uncollectible

One way it's to write-off directly the bad debts at the moment decided that the credit are uncollectible, the total amount it's reported as bad debt expenses which affect negativly the income statement and the accounts receivable are reduce in the same amount, less assets.

The other way it's to determine a percentage of total amount of accounts receivables as uncollectible, exist many ways to analize the accounts receivable and figure the value of uncollectible.

When the company have the percentage of uncollectible accounts the journal entry required is Bad Expenses (debit) with Allowance for Uncollectible Accounts (credit)

At the moment of the write-off as the expenses were before recognized we only use the Allowance for Uncollectible Accounts (Debit) with Accounts Receivable (Credit), with this we are recognizing the uncollectible credit of the company.

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