Allowance for Doubtful Accounts Case

uSunset, Inc. began operations January 1, Year 1. Complete the Aging Schedule for Accounts Receivable as of December 31, Year 2. (Round to the nearest whole number)

uPrepare a calculation of the amount of Bad Debt expense for year 2 considering the change of method. Show and label every piece of the calculation. (Round to the nearest whole number when necessary) The first line of the calculation is provided below.

Prepare the journal entry to record the Bad Debts Expense for the year ended December 31, Year 2

Document #1: Sunset, Inc. Select Financial Information for the Years Ended December 31, Year 1 December 31, Year 2 Gross credit sales Less: Returns and allowances Net credit sales $5,300,000 1.500.000 $3,800,000 $6,900,500 1.900.500 $5,000,000 Account receivable activity: Collections Write-offs Recoveries $3,260,000 0 0 $4,750,000 45,000 12,000 Document #2: Page 25 Sunset, Inc. Accounts Receivable Aging Schedule - December 21, Year 2 Category 0-30 31-90 91-180 Over 180 Totals $500,000 $120,000 $ 90,000 $ 35,000 Document #3: INTEROFFICE MEMO TO: Accounting Department FROM: Controller SUBJECT: Accounts Receivable Methodology and Rates Effective January 1, Year 2, we will change our method of determining the allowance for uncollectible accounts from using 1% of annual credit sales to applying various percentages to the accounts receivable aging. Rates are as follows: Days Past Due 0-30 31-90 91-180 Over 180 Uncollectible Percentage 2% 10% 30% 85% A/R Amount Percentage Allowance O to 30 days 2% 10% 30% 31 to 90 days 91 to 180 days Over 180 days Accounts receivable 85% Allowance for Doubtful Accts Date Amount Allowance Balance, December 31, Year 1