Credit Losses Based on Accounts Receivable

Maxell, 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	$140,000	1%
31-60 days past due	22,000	3%
61-120 days past due	24,000	6%
121-180 days past due	11,000	10%
Over 180 days past due	6,000	20%
	$203,000

The company handles credit losses using the allowance method. The credit balance of the Allowance for Doubtful Accounts is $1,240 on December 31, before any adjustments.

1. Prepare the adjusting entry for estimated credit losses on December 31.
2. Prepare the journal entry to write off the Porter Company's account on May 12 of the following year in the amount of $880

a.

General Journal
Date	Description	Debit	Credit
Dec.31	Bad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable - Porter Company
	Bad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable - Porter Company
	To record allowance for credit losses.

b.

General Journal
Date	Description	Debit	Credit
May 12	Bad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable - Porter Company
	Bad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable - Porter Company
	To write off Porter Company's account.

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