Question

Exercise 7-14 (Algo) Calculate uncollectible accounts using the aging method; record adjustments [LO7-5, 7-6]Zuo Software categorizes its accounts receivable into four age groups for purposes of estimating its allowance for uncollectible accounts.Accounts not yet due = $344,000; estimated uncollectible = 20%.Accounts 1–30 days past due = $43,000; estimated uncollectible = 23%.Accounts 31–90 days past due = $34,400; estimated uncollectible = 26%Accounts more than 90 days past due = $25,800; estimated uncollectible = 30%.At 12/31/2021, before recording any adjustments, Zuo has a credit balance of $29,300 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:

Calculation of Estimated uncollectible account

Value             % Uncollectible   Amount uncollectible

$344,000                  20%                   $68800

$43,000                     23%                   $9890

$34,400                     26%                   $8944

$25,800                     30%                   $7740

$447,200                                              $95,374

1. Balance of allowance for uncollectible accounts on 12/31/2021 is  $95,374

2. Journal entry for adjusting the allowance for uncollectible account is

Date   Account Title and Explanation                 Debit      Credit

           Bad debt expenses                                 $66,074

                Allowance for uncollectible amount                $66,074

                ($95,374 - $29,300)

             (To record the adjusting allowance for uncollectible account)

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

Accounts receivables                                     $447,200

Less: Allowance for uncollectible account     $66,074

Net Account Receivables                               $381,126