Question

Baltimore Company uses aging to estimate uncollectibles. At the end of the fiscal year, December 31, 2018, Accounts Receivable has a balance that consists of: Dollar Value Age of Account Estimated Collectible $165,000 < 30 days old 98% 75,000 30 to 60 days old 90% 40,000 61 to 120 days old 79% 11,000 > 120 days old 18% The current unadjusted Allowance for Uncollectible Accounts balance is a debit balance of $2,000 and the Bad Debt Expense accounts has an unadjusted balance of zero. After the adjusting entry is made, what will be the dollar balances in the Allowance for Doubtful Accounts? Round to nearest whole dollar.

Answer 1

Answer:

Baltimore Company

After the adjustment is made, the dollar balances in the Allowance for Doubtful Accounts will be $26,220 ($28,220 - $2,000) credit.

Explanation:

a) Data and Calculations:

Dollar Value     Age of Account    Estimated Collectible  

$165,000         < 30 days old               98%   $161,700

   75,000         30 to 60 days old        90%     67,500

   40,000         61 to 120 days old       79%      31,600

     11,000         > 120 days old             18%         1,980

$291,000                                                       $262,780

Uncollectible expense = $28,220 ($291,000 - $262,780)

Adjustment to the Allowance for Uncollectible accounts:

Unadjusted balance (debit)  ($2,000)

Uncollectible expense         $28,220

Adjusted balance (credit)    $26,220