Answer:
A. $32,000
B. Dec 31
Dr Bad debts expense $18,600
Cr Allowance for doubtful accounts $18,600
C. Dec 31
Dr Bad debts expense $34,400
Cr Allowance for doubtful accounts $34,400
Explanation:
a. Calculation to Estimate the balance of the Allowance for Doubtful Accounts assuming the company uses 5% of total accounts receivable to estimate uncollectibles, instead of the aging of receivables method
Accounts receivable
Not due $ 410,000
1 to 30 $ 104,000
31 to 60 $ 50,000
61 to 90 to$ 32,000
Over 90 $44,000
Total Accounts receivable $640,000
Estimate the balance of the Allowance for Doubtful Accounts=$640,000*5%
Estimate the balance of the Allowance for Doubtful Accounts=$32,000
Therefore the Estimated balance of the Allowance for Doubtful Accounts will be $32,000
b. Preparation of the adjusting entry to record Bad Debts Expense from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $13,400 credit.
Dec 31
Dr Bad debts expense $18,600
Cr Allowance for doubtful accounts $18,600
($32,000-$13,400)
(To record Bad Debts Expense)
c. Preparation ofn 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 a $2,400 debit.
Dec 31
Dr Bad debts expense $34,400
Cr Allowance for doubtful accounts $34,400
($32,000+$2,400)
(To record bad debts expense )
