“Garcia Company has accounts receivable of $92,500 at March 31, 2001. An analyDetermine bad debt expense, and prepare the adjusting entry.

Credit terms are 2/10, n/30. At March 31, 2001, there is a $1,600 credit balance in Allowance for Doubtful Accounts prior to adjustment. The company uses the percentage of receivables basis for estimating uncollectible accounts. The company’s estimates of bad debts are as follows:

Instructions

(a) Determine the total estimated uncollectibles.

(b) Prepare the adjusting entry at March 31, 2001, to record bad debts expense.

(c) Discuss the implications of the changes in the aging schedule from 2000 to 2001.

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Balance, March 31 Month of Sale 2001 2000 March $65,000 $75,000 February 12,600 8,000 December and January 8,500 2,400 November and October 6,400 1,100 $92,500 $86,500