Question

1. An aging of the company’s accounts receivable on December 31, and a historical analysis of the percentage of uncollectible accounts in each age class follow:

Age Class                     Balance                       Percent Uncollectible

Not past due                 $715,000                                 1%

1-30 days                       310,000                                 2%

31-60 days                     102,000                                 15%

61-90 days                     76,000                                    30%

91-120 days                   97,000                                    60%

                                    $1,300,000

a. Determine the bad debt expense for the period, and journalize the adjusting entries.

b. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Net Realizable Value of Accounts Receivable.

Accounts Receivable                                                               _____________

Allowance for Doubtful Accounts                                          _____________

Net Realizable Value of Accounts Receivable                       ____________

Answer 1

a) Calculation of Bad Debts Expense for the period (Amounts in $)

Age Class	Balance (A)	Percent Uncollectible (B)	Amount Uncollectible (A*B)
Not past due	715,000	1%	7,150
1-30 days	310,000	2%	6,200
31-60 days	102,000	15%	15,300
61-90 days	76,000	30%	22,800
91-120 days	97,000	60%	58,200
Total	1,300,000		109,650

Therefore bad debt expense for the period is $109,650.

Adjusting Journal Entry is shown as follows:-

Journal Entries (Amounts in $)

Accounts Title	Debit	Credit
Bad Debt Expense	109,650
Allowance for Doubtful Accounts		109,650
(To record the bad debt expense)

b) Adjusted balances are shown as follows:- (Amounts in $)

Accounts Receivable	1,300,000
Allowance for Doubtful Accounts	(109,650)
Net Realizable Value of Accounts Receivable	1,190,350