Question

Blocker Company estimates its uncollectible accounts based on an analysis of receivables. On December 31, a junior accountant prepared the following aging schedule for the company’s $88,000 in outstanding receivables.

Estimated

Uncollectible Accounts

Age Interval                                                              Amount                           %             

Not due                                                                      $58,650                            2%             

1-30 days past due                                                13,220                             4%                   

31-60 days past due                                                   8,930                         20%                

61-90 days past due                                                   4,000                         30%                

Over 90 days past due                                               3,200                         50%                

                                                                                      $88,000                                         

The allowance for Doubtful Accounts currently has a $210 debit balance.

1. Prepare the adjusting entry to record the company’s estimate of uncollectible accounts.

Date	Accounts	DR	CR

2. Prepare the journal entry to write off the following accounts:

T. Donaldson…………………………………………………………..$ 700

J.Kyle……………………………………………………………………….    450

D. Mize…………………………………………………………………… 1,000

Date	Accounts	DR	CR

3. Prepare the journal entry to record receipt of the $450 owed by J. Kyle.

Date	Accounts	DR	CR

4. Write an answer to the following question: What circumstances would cause the Allowance for doubtful Accounts to have a debit balance prior to adjustment?

Answer 1

Age Interval	Receivables	% Uncollectible	Allowance
Not yet due	$            58,650	2.00%	$               1,173
10-30 days past due	$            13,220	4.00%	$                  529
31-60 days past due	$               8,930	20.00%	$               1,786
61-90 days past due	$               4,000	30.00%	$               1,200
Over 90 days past due	$               3,200	50.00%	$               1,600
Total	$            88,000		$              6,288

1.

Account Titles	Debit	Credit
Bad Debt Expense	$          6,498
Allowance for Doubtful Accounts		$          6,498

2.

Account Titles	Debit	Credit
Allowance for Doubtful Accounts	$          2,150
Accounts Receivable - T. Donaldson		$             700
Accounts Receivable - J. Kyle		$             450
Accounts Receivable - D. Mize		$          1,000

3.

Account Titles	Debit	Credit
Accounts Receivable - J. Kyle	$             450
Allowance for Doubtful Accounts		$             450
Cash	$             450
Accounts Receivable - J. Kyle		$             450

4.
When the accounts receivable is uncollectible and written off which is more than credit balance of Allowance for Doubtful accounts, it causes allowance balance to be debit.

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