Answer:
(a) The estimate of what the allowance for doubtful accounts balance is $59,300.
(b) The appropriate entries, if allowance for doubtful accounts has a credit balance of $6,500 prior to adjustment, will be:
Debit Bad debt expense ($59,300 - $6,500) $52,800
Credit Allowance for doubtful accounts $52,800
<em>(To record bad debt expense)</em>
Explanation:
Age Interval Balance Percent Uncollectible Bad debt expense
Not past due $865,000 1% $8,650
1-30 days past due 110,000 2% 2,200
31-90 days past due 65,000 15% 9,750
91-180 days past due 42,000 60% 25,200
Over 180 days past due 15,000 90% 13,500
Total $1,097,000 $59,300
- The aging of accounts receivable above was used in determining the bad debt expense by multiplying the percentage that is deemed uncollectible by the balance in accounts receivable.
- If the allowance for doubtful accounts has a credit balance of $6,500, the adjustment to bad debt expense required will be $59,300 - $6,500 = $52,800.
