Creative Co. uses the allowance method to estimate uncollectible accounts receivable. The computer produced the following aging of the accounts receivable at year end:

Instructions
a. Complete the aging schedule and calculate the total estimated uncollectible accounts from the above information.
b. Record the bad debt adjusting entry using the above information.
c. In the following year, $12,200 of the outstanding accounts receivable is determined to be uncollectible. Record the write-off of the uncollectible accounts.
d. The company collects $3,400 of the $12,200 of accounts receivable that were determined to be uncollectible in part (c). No further amounts are expected to be collected. Prepare the journal entry (or entries) to record the collection of this amount.

Taking It Further

The accounts receivable manager is concerned about the amount of accounts receivable that are determined to be uncollectible. This amount has been increasing at a small but steady rate each year. Prepare a memo to the manager describing how data analytics could be used to better manage customer accounts.

Transcribed Image Text:

Accounts receivable Estimated % uncollectible Estimated uncollectible accounts Total $210,000 Number of Days Outstanding 0-30 $120,000 1% 31-60 61-90 $55,000 $20,000 12% 7% The unadjusted balance in Allowance for Doubtful Accounts is a credit of $5,000. 91-120 $15,000 25%