Question

Aging Class (Number Receivables Estimated Percent of
of Days Past Due) Balance on December Uncollectible Accounts
0-30 days $715,000 1%
31-60 days 310,000 2
61-90 days 102,000 15
91-120 days 76,000 30
More than 120 days 97,000 60
Total receivables $1,300,000
A. Journalize the write-offs under the direct write-off method. If an amount box does not require an entry, leave it blank.
B. Journalize the write-offs and the year-end adjusting entry under the allowance method, assuming that the allowance account had a beginning balance of $95,000 and the company uses the analysis of receivables method.

Answer 1

Answer and Explanation:

The journal entries are shown below:

a Bad debt expense $102,500  

         To Accounts Receivable-Kim Abel  $21,550  

         To Accounts Receivable-Lee Drake  $33,925  

         To Accounts Receivable-Jenny Green $27,565  

         To Accounts Receivable-Mike Lamb  $19,460

(Being the bad debt expense is recorded)  

b Allowance for Doubtful accounts  $102,500

    ,    To Accounts Receivable-Kim Abel  $21,550  

         To Accounts Receivable-Lee Drake  $33,925  

         To Accounts Receivable-Jenny Green $27,565  

         To Accounts Receivable-Mike Lamb  $19,460

(Being the written- off amount is recorded)    

Bad debt expense $117,150  

      Allowance for Doubtful accounts  $117,150

(Being the bad debt expense is recorded)

Working notes:

                   (in $)                                                                     (in $)

Days          Receivables Balance       % Uncollectible      Allowance

0-30 days    715000                                 1%                        7150

31-60 days   310000                                 2%                      6200

61-90 days   102000                                 15%                    15300

91-120 days   76000                                 30%                    22800

More

than 120 days  97000                               60%                   58200

Total               1300000                                               109650

Now the adjustment balance is

= $109,650 - ($95,000 - $102,500)

= $109,650