Question

Zuo Software categorizes its accounts receivable into four age groups for purposes of estimating its allowance for uncollectible accounts. Accounts not yet due = $450,000; estimated uncollectible = 5%. Accounts 1–30 days past due = $56,300; estimated uncollectible = 9%. Accounts 31–90 days past due = $45,000; estimated uncollectible = 13% Accounts more than 90 days past due = $33,800; estimated uncollectible = 17%. At 12/31/2021, before recording any adjustments, Zuo has a credit balance of $23,400 in its allowance for uncollectible accounts. Required: 1. Estimate the appropriate 12/31/2021 balance for Zuo’s allowance for uncollectible accounts. 2. What journal entry should Zuo record to adjust its allowance for uncollectible accounts? 3. Calculate Zuo’s 12/31/2021 net accounts receivable balance.

Answer 1

Answer:

1. Appropriate balance for Zuo’s allowance for uncollectible accounts at 12/31/2021 is $39,163

Account titles                                               Debit ($)              Credit ($)

   Bad debt expense                                      $15,763

   Allowance for uncollectible amount                                      $15,763

3. Net Account Receivables = $545,937

Explanation:

Accounts not yet due = $450,000; estimated uncollectible = 5%.

Accounts 1–30 days past due = $56,300; estimated uncollectible = 9%.

Accounts 31–90 days past due = $45,000; estimated uncollectible = 13%

Accounts more than 90 days past due = $33,800; estimated uncollectible = 17%

1. Calculation of estimated collectible amount

Dollar value    Percent Uncollectible      Amount Uncollectible

$450,000                5%                              $ 22,500

$56,300                  9%                              $ 5,067

$45,000                 13%                              $ 5,850

$33,800                  17%                             $ 5,746

Appropriate balance for Zuo’s allowance for uncollectible accounts at 12/31/2021 = $22,500 + $5,067 + $5,850 + $5,746 = $39,163

2. Account titles                                               Debit ($)              Credit ($)

   Bad debt expense                                      $15,763

   Allowance for uncollectible amount                                      $15,763

Adjusting entry = $39,163 - $23,400 = $15,763

3). Net account receivable balance on 12/31/2021:

Accounts receivables total = $585,100

Less: Allowance for uncollectible account = $39,163

Net Account Receivables = $545,937