At December 31, 2020, before any year-end adjustments, the Accounts Receivable balance of Tender Clinic is $238,000. Allowance for Uncollectible Accounts has a credit balance of $7,090. Tender prepares the following aging schedule for accounts receivable: (Click the icon to view the aging schedule.) Requirements 1. Based on the aging-of-receivables method, is the unadjusted balance of the allowance account adequate? Is it too high or too low? How does management determine what percentages to use for estimating uncollectible accounts? 2. Make the entry required by the aging schedule. Prepare a T-account for the allowance. 3. Show how Tender will report Accounts Receivable on its December 31 balance sheet. Include the two accounts that come before receivables on the balance sheet, using assumed amounts. ..... Requirement 1. Based on the aging-of-receivables method, is the unadjusted balance of the allowance account adequate? Is it too high or too low? How does management determine what percentages to use for estimating uncollectible accounts? Before we can assess whether the current balance of the allowance account is adequate, we first have to calculate a revised allowance for uncollectible accounts amount. (Round your answers to the nearest whole dollar.) Allowance for uncollectible accounts: Credit balance needed 0-30 31-60 Aging schedule 61-90 Over 90 Subtotal Age of Accounts Less: Unadjusted balance Total Balance 0-30 Days 61-90 Days 238,000 Adjusting entry amount $110,000 31-60 Days $63,000 3.5% $53,000 Over 90 Days $12,000 30 % Estimated uncollectible 0.3 % 10.0 % Complete the sentences below. (Round your answers to the nearest whole dollar.) The credit balance at December 31 in Allowance for Uncollectible Accounts should be $ The current balance is $. Thus, the current balance of the allowance account is Management uses their vand V with collections to arrive at the percentages to use for estimating uncollectible accounts. Print Done Requirement 2. Make the entry required by the aging schedule. Prepare a T-account for the allowance. (Record debits first, then credits. Explanations are not required.) First, prepare the journal entry using the adjusting entry amount we calculated in the first step Journal Entry Date Accounts Debit Credit Dec 31 At December 31, 2020, before any year-end adjustments, the Accounts Receivable balance of Tender Clinic is $238,000. Allowance for Uncollectible Accounts has a credit balance of $7,090. Tender prepares the following aging schedule for accounts receivable: Click the icon to view the aging schedule.) Requirements 1. Based on the aging-of-receivables method, is the unadjusted balance of the allowance account adequate? Is it too high or too low? How does management determine what percentages to use for estimating uncollectible accounts? 2. Make the entry required by the aging schedule. Prepare a T-account for the allowance. 3. Show how Tender will report Accounts Receivable on its December 31 balance sheet. Include the two accounts that come before receivables on the balance sheet, using assumed amounts. Journal Entry Aging schedule Date Accounts Debit Credit - Dec. 31 Age of Accounts 0-30 Days 61-90 Days Over 90 Days Total Balance 238,000 Estimated uncollectible 31-60 Days $63.000 $110,000 $53,000 $12,000 0.3% 3.5 % 10.0 % 30 % Now, prepare the T-account for Allowance for Uncollectible Accounts (Leave any unused cells blank.) Allowance for Uncollectible Accounts Print Done Requirement 3. Show how Tender will report Accounts Receivable on its December 31 balance sheet. Include the two accounts that come before receivables on the balance sheet, using assumed amounts There are two generally accepted methods to present receivables on the balance sheet. The first method reports the allowance for uncollectible accounts amount in the line item description. (Enter the allowance for the uncollectible accounts amount. Then calculate the net accounts receivable amount.) Balance Sheet (Partial): Current assets Cash $XX.XXX Short-Term Investments XX.XXX Accounts Receivable, net of Allowance for Uncollectible Accounts of $ The second method used to present receivables on the balance sheet shows the Allowance for Uncollectible Accounts on a line of its own. Balance Sheet (Partial): Accounts Receivable Less: Allowance for Uncollectible Accounts Accounts Receivable, net
