Question

Hovak Company has credit sales of $4,500,000 for year 2017. At December 31, 2017, the company's Allowance for Doubtful Accounts has an unadjusted debit balance of $3,400. Hovak prepares a schedule of its December 31, 2017, accounts receivable by age. On the basis of past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here. Expected Percent Uncollectible December Age of 31, 2017, Accounts Receivable Accounts Receivable $396,400 Not yet due 277,8001 to 30 days past due 48,000 31 to 60 days past due 6,600 61 to 90 days past due 71 2,800 Over 90 days past due 2.0% 4.0 8.5 39.0 82.0 Required 1. Compute the required balance of the Allowance for Doubtful Accounts at December 31, 2017, using the aging of accounts receivable method.

Answer 1

SOLUTION : 1
	CALCULATION OF PROVISION OF BAD DEBTS FOR THE YEAR END
	Age Group	Amount	%	Expense Value
	Not yet due	$               3,96,400	2.00%	$                7,928
	1-30 day days past due	$               2,77,800	4.00%	$              11,112
	31-60 Days of past due	$                  48,000	8.50%	$                4,080
	61-90 Days of past due	$                     6,600	39.00%	$                2,574
	Over 90 Days past Due	$                     2,800	82.00%	$                2,296
				$              27,990
SOLUTION : 2
	Allowance for Doubtfull Debts (Opening Bal.)	$                     3,400	Debit
	Add: Provision for the Allowance of Bad debts =	$                  27,990	Credit
	Balance need to be provission for the year	$                  31,390	Credit
	So we can show the bad debts expenses for the year =	$                  31,390
Journal Entries
Date	Account Title and explanation	Debit	Credit
	Bad Debt Expenses	$                  31,390
Dec 31, 2017	To Allowance for Doubtful Debts		$                     31,390
	(To Record the allowance for Doubtfull Debts for the year End)
SOLUTION : 3
	From one customer $ 3,455 recivable is uncollectable , journal entry of the same will be as below,
	Entry of the same will be passed as below,
Journal Entries
Date	Account Title and explanation	Debit	Credit
	Allowance for Doubtful Debts	$                     3,455
July 31, 2018	Account Receivable		$                       3,455
	IT means write off the uncollectable amount will not affect revenue account
	Answer = No effect on Net income of the year 2018