Answer:
a. The amount of the Allowance for Doubtful Accounts that should appear on the December 31, Balance Sheet of the current year is:
= $8,965.
b. Adjusting Journal Entry:
Debit Bad Debts Expense $7,365
Credit Allowance for Doubtful Accounts $7,365
To record bad debts expense and bring the balance of the Allowance for Doubtful Accounts to a credit balance of $8,965.
Explanation:
a) Data and Calculations:
Accounts Receivable balance = $185,700
Allowance for Doubtful Accounts $1,600 (credit balance)
Aging Schedule:
Account Age                 Balance  Estimated Uncollectible   Amount
                                                                  Percentage
Current (not yet due) $96,000                  1.00%                    $960
1—30 days past due    64,000                  2.50%                    1,600
30—60 days past due  16,000                  11.00%                   1,760
61—90 days past due    6,500                  37.00%                 2,405
Over 90 days past due 3,200                  70.00%                 2,240
Total                         $185,700                                              $8,965
Bad Debts Expense:
Allowance for Uncollectible Accounts:
Beginning balance     ($1,600)
Ending balance           $8,965
Bad Debts expense = $7,365