Credit Losses Based on Accounts Receivable

Graham, Inc., analyzed its accounts receivable balances at December 31, and arrived at the aged balances listed below, along with the percentage that is estimated to be uncollectible:

Age Group	Balance	Probability of Noncollection
0-30 days past due	$102,000	1%
31-60 days past due	20,000	3%
61-120 days past due	22,000	6%
121-180 days past due	9,000	10%
Over 180 days past due	4,000	20%
	$157,000

The company handles credit losses using the allowance method. The credit balance of the Allowance for Doubtful Accounts is $1,040 on December 31, before any adjustments.

Prepare the adjusting entry for estimated credit losses on December 31.

Prepare the journal entry to write off the Matthews Company's account on April 10 of the following year in the amount of $680

a. General Journal Date Description Debit Credit Dec.31 Bad Debts Expense 0 Allowance for Doubtful Accounts 0 To record allowance for credit losses b. General Journal Date Description Debit Credit April 10 Allowance for Doubtful Accounts 680 0 Accounts Receivable - Matthews Company 680 To write off Matthews Company's account