Question

Net Zero Products, a wholesaler of sustainable raw materials. Prepared the following aging of receivables analysis. Days Past Due Total 0 1 to 30 31 to 60 61 to 90 Over 90 Accounts receivable $ 115,200 $ 80,000 $ 18,000 $ 7,200 $ 4,000 $ 6,000 Percent uncollectible 1 % 3 % 5 % 8 % 11 % 1. Estimate the balance of the Allowance for Doubtful Accounts using the aging of accounts receivable method. 2. Prepare the adjusting entry to record bad debts expense assuming the unadjusted balance in the Allowance for Doubtful Accounts is a $1,000 credit.

Answer 1

Answer:

Net Zero Products

1. The balance of the Allowance for Doubtful Accounts using the aging of accounts receivable method is:

= $2,680.

2. The Adjusting Entry:

Debit Bad Debts Expense $1,680

Credit Allowance for Doubtful Accounts $1,680

To record bad debts expense and to bring the balance of the Allowance for Doubtful Accounts to a credit balance of $2,680.

Explanation:

a) Data and Calculations:

Days Past Due  Total         Percent           Amount

                            AR      Uncollectible   Uncollectible

0                     $80,000       1 %                   $800

1 to 30             $18,000      3 %                     540

31 to 60            $7,200      5 %                     360

61 to 90           $4,000       8 %                     320

Over 90          $6,000       11 %                     660

Total            $ 115,200                             $2,680

Allowance for Doubtful Accounts:

Unadjusted balance = $1,000

Adjusted balance         2,680

Bad Debts Expense = $1,680