Below is the totals section of XYZ Corporations full ageing schedule. XYZ will be using this information to estimate uncollectible accounts receivable at year-end.

Instructions

(a) Calculate the total estimated bad debts based on the above information.

(b) Prepare the year-end adjusting journal entry to record the bad debts using the allowance method and the aged uncollectible accounts receivable determined in (a). Assume the current balance in Allowance for Doubtful Accounts is a $3,000 credit.

(c) Prepare the year-end adjusting journal entry to record the bad debts using the allowance method and the aged uncollectible accounts receivable determined in (a). Assume the current balance in Allowance for Doubtful Accounts is a $500 debit.

(d) Of the above accounts, $1,800 is determined to be specifically uncollectible. Prepare the journal entry to write off the uncollectible accounts.

(e) The company subsequently collects $700 on a specific account that had previously been determined to be uncollectible in (d). Prepare the journal entry(ies) necessary to restore the account and record the cash collection.

(f) In your own words, explain how establishing an allowance account satisfies the expense recognition principle.

Number of Days Outstanding 31-60 61-90 91-120 Over 120 Accounts receivable 375,000 $220,000 90,000 $ 30,000 $ 20,000 $ 15,000 20% Total 0-30 % uncollectible 1% 4% 5% 9% Estimate bad debts