AGING METHOD On January 1, 2010, Smith, Inc., has the following balances for accounts receivable and allowance for doubtful accounts:

Accounts Receivable $273,000 Allowance for Doubtful Accounts (a credit balance) 4,600 During 2010, Smith had $2,175,000 of credit sales, collected $2,235,000 of accounts receivable, and wrote off $4,000 of accounts receivable as uncollectible. At year end, Smith performs an aging of its accounts receivable balance and estimates that $4,500 will be uncollectible.

Required:

. Calculate Smith’s preadjustment balance in accounts receivable on December 31, 2010.

. Calculate Smith’s preadjustment balance in allowance for doubtful accounts on December 31, 2010.

. Prepare the necessary adjusting entry for 2010.

Cornerstone Exercise