Question

Required information Use the following information for the Exercises below. Skip to question [The following information applies to the questions displayed below.] Daley Company prepared the following aging of receivables analysis at December 31. Days Past Due Total 0 1 to 30 31 to 60 61 to 90 Over 90 Accounts receivable $ 635,000 $ 409,000 $ 103,000 $ 49,000 $ 31,000 $ 43,000 Percent uncollectible 2 % 3 % 6 % 8 % 11 % Exercise 7-9 Percent of receivables method LO P3 a. Estimate the balance of the Allowance for Doubtful Accounts assuming the company uses 4% of total accounts receivable to estimate uncollectibles, instead of the aging of receivables method. b. Prepare 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 $13,300 credit. c. Prepare 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 $2,300 debit.

Answer 1

Answer:

Follows are the solution to this question:

Explanation:

In point A:

The estimated amount of uncollectible allowance =$\ \ 635,000 \times 4 \% = \ \ 2,540,000$

In point B                                    Journal

Titles and descriptions of accounts         Debit          Credit         Calculation    

Expenditure on bad debts                $\ \ 2,526,700$

Doubted debt allowance                          $\ \ 2,526,700 \ \ (\ \ 2,540,000 - \ \ 13,300)$

(Bad Debts Expense recorded)  

In point C                                         Journal

Titles and descriptions of accounts         Debit          Credit         Calculation    

Expenditure on bad debts               $\ \ 2,553, 300$

Doubted debt allowance                        $\ \ 2,553, 300 \ \ \ \ (\ \ 2,540,000 + \ \ 13,300)$    

(Bad Debts Expense recorded)