Software Corporation had credit sales of \(\$ 6.5\) million in 1990. On December 31, 1990, the company's Allowance for Doubtful Accounts had a debit balance of \(\$ 7,400\). The accountant for Software Corporation has prepared a schedule of the December 31,1990 , accounts receivable by age, and on the basis of past experience has estimated the percentage of the receivables in each age category that will become uncollectible. This information is summarized as follows:

\section*{Required}
1. Calculate the amount that should appear in the December 31, 1990, balance sheet as allowance for doubtful accounts.
2. Prepare the general journal entry to record bad debts expense for 1990 .
3. On May 21, 1991, Software Corporation concluded that a customer's \(\$ 9,600\) accounts receivable was uncollectible and that the account should be written off. What effect will this action have on Software Corporation's 1991 net income? Explain your answer.

Transcribed Image Text:

December 31, 1990 Accounts Receivable $600,000 300,000 70,000 40,000 32,000 Age of Accounts Receivable Not due (under 30 days) 1 to 30 days past due 31 to 60 days past due 61 to 90 days past due over 90 days past due Uncollectible Percent Expected 2 13508 40