Question

2. Broadway Limited had an $800 credit balance in Allowance for Doubtful Accounts at December 31, 2018, before the current year's provision for uncollectible accounts. An aging of the accounts receivable revealed the following (10 marks):

                                                                                                          Estimated Percentage

                                                                                                                Uncollectible

       Current Accounts........................................... $150,000                       1%

       1-30 days past due.............................................. 15,000                       3%

       31-60 days past due.............................................. 8,000                       6%

       61-90 days past due.............................................. 5,000                     12%

       Over 90 days past due....................................       6,000                     30%

       Total Accounts Receivable............................. $184,000

Instructions

(a)   Prepare the adjusting entry at December 31, 2018, to recognize bad debts expense.

(b)   Assume the same facts as above except that the Allowance for Doubtful Accounts account had an $800 debit balance before the current year's provision for uncollectible accounts. Prepare the adjusting entry for the current year's bad debts.

Answer 1

Age of Accounts	Amount	Estimated Percentage Uncollectible	Estimated Amount Uncollectible
Current Accounts	150000	1%	1500
1-30 days past due	15000	3%	450
31-60 days past due	8000	6%	480
61-90 days past due	5000	12%	600
Over 90 days past due	6000	30%	1800
Total	184000		4830

a
		Debit	Credit
December 31, 2018	Bad debts expense	4030		=4830-800
	Allowance for Doubtful Accounts		4030
b
December 31, 2018	Bad debts expense	5630		=4830+800
	Allowance for Doubtful Accounts		5630

Answer 2