APPLY THE CONCEPTS: Estimate the doubtful accounts and determine the net realizable value

Assume that you are a staff accountant at Tagolo Company. One of your responsibilities is to make the adjusting entry to record the bad debt expense at the end of the accounting period.

The accounts receivable clerk informs you that 175 customers have outstanding balances as of December 31, 2010. The clerk provides you with the following aging schedule. You confirm that the total on the clerks report balances to the general ledger balance for Accounts Receivable.

Age Category	Amount
Not yet due	$112,000
1 to 30 days past due	20,800
31 to 60 days past due	12,800
61 to 90 days past due	8,000
91 to 120 days past due	4,800
Over 120 days past due	1,600
Total Accounts Receivable	$160,000

You have reviewed the collections history of the company and determined that the following percentages of each age category have become uncollectible in the past. There have been no significant changes to collections or the companys credit policy, so you assume that the trend will continue.

Complete the following table to determine the amount estimated to become uncollectible. If required, round to the nearest dollar.

	Estimated %	Amount
	to Become	to Become
Age Category	Uncollectible	Uncollectible
Not yet due	2%	$
1 to 30 days past due	6%
31 to 60 days past due	12%
61 to 90 days past due	28%
91 to 120 days past due	46%
Over 120 days past due	64%
Total		$

What is the desired ending balance for Allowance for Doubtful Accounts? $

What is the net realizable value of Accounts Receivable? $

APPLY THE CONCEPTS: Prepare the adjusting entry for bad debt expense

Use the following T accounts to prepare the adjusting entry required at the end of the year to record the expense for bad debt. If required, round your answers to the nearest dollar. If amount is zero, enter zero or leave the box blank.

SelectAccounts ReceivableAllowance for Doubtful AccountsBad Debt ExpenseCorrect 1 of Item 6
Bal	0

SelectAccounts ReceivableAllowance for Doubtful AccountsBad Debt ExpenseCorrect 6 of Item 6
			210 Bal

Use the selection lists to indicate the effect of the transaction recorded in each T account has on the accounting equation and on which financial statement the account is reported.

As it becomes clear that a customer is unable to pay the amount it owes to the company, the customers balance should be written off. As customer account balances are written off, the balance in Allowance for Doubtful Accounts decreases. What if the sum of the customers balances that are written off exceeds the credit balance in the account? This will result in a SelectcreditdebitCorrect 19 of Item 6 balance in Allowance for Doubtful Accounts. Assume this is the case for Tagolo Company.

The balance in Allowance for Doubtful Accounts is a debit balance of $210. The estimate of the amount expected to become uncollectible is the same. Under this scenario, what would be the amount of the adjusting entry? $