#10 [optional] Allowance method,

Allowance account analysis Fortner Corporation uses the allowance method of accounting for uncollectible accounts receivable. On January 1, 2020, the balance in Allowance for Doubtful Accounts was $130,000 credit. During 2020, credit sales totaled $9,000,000, $90,000 of bad debts were written off, and recoveries of accounts previously written off amounted to $15,000.

On December 31, 2020, Fortner recorded an adjustment for bad debt expense of $180,000 using a percentage of receivables approach.

The auditors inquired into the $180,000 provision for bad debt expense and requested an aging of Fortners accounts receivable as of year-end as follows:

November to December 2020 $ 1,080,000

July to October 650,000

January to June 420,000

Prior to January 2020 150,000 * $60,000 belongs to a customer who filed bankruptcy in 2020

Total $ 2,300,000

Upon analysis of this aging, the auditors proposed for Fortner to write off the $60,000 belonging to the bankrupt customer. Additionally, they proposed that Fortner switch to the aging of receivables approach and apply these uncollectible percentages to the following aging categories: 2% for November and December, 10% for July to October, 25% for January to June, and 80% for the remaining balance pertaining to sales prior to January 2020. Fortner complied with both requests.

Instructions: Answer the following questions regarding Fortners accounts receivable. Use the T account provided to help you.

1. What is the balance of Allowance For Doubtful Accounts immediately after the $180,000 adjustment for bad debt expense recorded by Fortner? $

2. What is the amount of estimated uncollectible accounts receivable based on the aging of receivables method suggested by the auditors? $

3. What, if any, is the amount of any additional bad debt expense that Fortner needs to record to comply with the auditors proposals? $

4. What amount of bad debt expense will Fortner report on its 2020 income statement? $

5. Allowance For Doubtful Accounts

Debit Credit

01/01/2020 balance

12/31/2020 balance after BDE