Question

A company has the following balances on December 31, 2021, before any year-end adjustments: Accounts Receivable = $83,000; Allowance for Uncollectible Accounts = $1,100 (credit). The company estimates uncollectible accounts based on an aging of accounts receivable as shown below:

				Estimated
	Amount			Percent
Age Group	Receivable			Uncollectible
Not yet due	$	45,000		3	%
0 − 30 days past due		17,000		25	%
31 − 90 days past due		13,000		50	%
More than 90 days past due		8,000		70	%
Total	$	83,000

Record the adjustment for uncollectible accounts on December 31, 2021. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Solution:

Computation of Year end allowance for estimated uncollectibles
Age	Balance	% Uncollectibles	Estimated Uncollectibles
Not yet due	$45,000	3%	$1,350
1-30 days	$17,000	25%	$4,250
31-90 days	$13,000	50%	$6,500
More than 90 days	$8,000	70%	$5,600
Total			$17,700

Date	Particulars	Debit	Credit
31-Dec	Bad debts expense Dr ($17700 - $1100)	$16,600
	To Allowance for doubtful accounts		$16,600
	(To record bad debts expense)