Credit Losses Based on Accounts Receivable

Miller, 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
030 days past due	$180,000	1%
3160 days past due	40,000	3%
61120 days past due	22,000	5%
121180 days past due	14,000	10%
Over 180 days past due	8,000	25%
	=$264,000

The company handles credit losses using the allowance method. The credit balance of the Allowance for Doubtful Accounts is $1,150 on December 31, before any adjustments.

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

b. Prepare the journal entry to write off the Lyons Companys account on April 10 of the following year in the amount of $525.

General Journal Date Description Dec.31 To record allowance for credit losses. General Journal Date Description April 10 To write off Lyons Company's account Debit Debit Credit Credit