Question
At December 31, 2017, Engel Company had a balance of $770,000 in its Accounts Receivable account and an unused balance of $7,000 in its Allowance
At December 31, 2017, Engel Company had a balance of $770,000 in its Accounts Receivable account and an unused balance of $7,000 in its Allowance for Doubtful Accounts. The company then analyzed and aged its accounts receivable as follows:
Current $468,000
1-60 days past due 244,000
61-180 days past due 38,000
Over 180 days past due 20,000
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Total accounts receivable $770,000
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In the past, the company experienced losses as follows: 1% of current balances, 5% of balances 1-60 days past due, 15% of balances 61-180 days past due, and 40% of balances over 180 days past due. The company bases its provision for credit losses on the aging analysis.
Required:
Report the each of the following transactions as journal entries and then post the amounts to the appropriate T-accounts.
a) Bad debts expense estimate at $23,580 assuming that there is an unused balance of $7,000 in the Allowance for Doubtful Accounts.
b) Write off $5,000 in customer accounts.
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