Question

Pearl Industries uses the allowance method of accounting for bad debts. The company produced the following aging of the accounts receivable at year-end.

Calculate the total estimated bad debts based on the information below. Number of Days Outstanding Total 0–30 31–60 61–90 91–120 Over 120 Accounts receivable $409,000 $246,000 $84,000 $43,000 $23,000 $13,000 % uncollectible 1% 4% 5% 8% 11% Estimated bad debts $enter estimated bad debts in dollars $enter estimated bad debts in dollars $enter estimated bad debts in dollars $enter estimated bad debts in dollars $enter estimated bad debts in dollars $enter estimated bad debts in dollars LINK TO TEXT LINK TO VIDEO

Prepare the year-end adjusting journal entry to record the bad debts using the aged uncollectible accounts receivable determined above. Assume the unadjusted balance in Allowance for Doubtful Accounts is a $3,900 debit. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit enter an account title for the adjusting entry to record the bad debts enter a debit amount enter a credit amount enter an account title for the adjusting entry to record the bad debts enter a debit amount enter a credit amount LINK TO TEXT LINK TO VIDEO

Of the above accounts, $4,700 is determined to be specifically uncollectible. Prepare the journal entry to write off the uncollectible account. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit enter an account title for the journal entry to write off the uncollectible account enter a debit amount enter a credit amount enter an account title for the journal entry to write off the uncollectible account enter a debit amount enter a credit amount LINK TO TEXT LINK TO VIDEO

The company collects $4,700 subsequently on a specific account that had previously been determined to be uncollectible in part (c). Prepare the journal entries necessary to (1) restore the account and (2) record the cash collection. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Account Titles and Explanation Debit Credit 1. enter an account title to record the first transaction enter a debit amount enter a credit amount enter an account title to record the first transaction enter a debit amount enter a credit amount 2. enter an account title to record the second transaction enter a debit amount enter a credit amount enter an account title to record the second transaction enter a debit amount enter a credit amount

Answer 1

		Number of Days Outstanding
	Total	0-30	31-60	61-90	91-120	Over 120
Accounts receivable                       (a)	$409,000	$246,000	$84,000	$43,000	$23,000	$13,000
% uncollectible                               (b)		1%	4%	5%	8%	11%
Estimated bad debts                    (a x b)	$11,240 [$2,460 + $3,360 + $2,150 + $1,840 + $1,430]	$2,460	$3,360	$2,150	$1,840	$1,430

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The year-end adjusting journal entry to record the bad debts
Account Titles and Explanation	Debit	Credit
Bad Debt Expense                         [$11,240 + $3,900]	$15,140
Allowance for Doubtful Accounts		$15,140
(To record bad debt expense)

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The journal entry to write off the uncollectible account
Account Titles and Explanation	Debit	Credit
Allowance for Doubtful Accounts	$4,700
Accounts Receivable		$4,700
(To write off uncollectible receivables )

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(c) The journal entries necessary to (1) restore the account and (2) record the cash collection
No.	Account Titles and Explanation	Debit	Credit
1	Accounts Receivable	$4,700
	Allowance for Doubtful Accounts		$4,700
2	Cash	$4,700
	Accounts Receivable		$4,700