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References

E$8-8($Algo$)$ Recording and Reporting Allowance for Doubtful Accounts Using the Percentage of Credit Sales and Aging of Accounts Receivable Methods $[$LO $8-2]$

Innovative Tech Incorporated $($ITI$)$ has been using the percentage of credit sales method to estimate bad debts. During November, ITI sold services on account for $$130,000$ and estimated that $\frac{1}{2}$ of $1$ percent of those sales would be uncollectible.

Required:

Prepare the November adjusting entry for bad debts.

Starting in December, ITI switched to using the aging method. At its December $31$ year$-$end, total Accounts Receivable is $$99,900,$ aged as follows: $(1)1$ to $30$ days old, $$84,000$; $(2)31$ to $90$ days old, $$11,000$; and $(3)$ more than $90$ days old, $$4,900.$ The average rate of uncollectibility for each age group is estimated to be $(1)10$ percent, $(2)20$ percent, and $(3)40$ percent, respectively. Prepare a schedule to estimate an appropriate year$-$end balance for the Allowance for Doubtful Accounts.

Before the end$-$of$-$year adjusting entry is made, the Allowance for Doubtful Accounts has a $$2,050$ credit balance at December $31.$ Prepare the December $31$ adjusting entry.

Show how the various accounts related to accounts receivable should be shown on the December $31$ balance sheet.

Complete this question by entering your answers in the tabs below.

Prepare the November adjusting entry for bad debts. $($If no entry is required for a transaction$/$event$,$ select $"$No Journal Entry Required" in the first account field.$)$

Journal entry worksheet