E8-8 Recording and Reporting Allowance for Doubtful Accounts Using the Percentage of Credit Sales and Aging of Accounts Receivable Methods [LO 8-2]

Innovative Tech Inc. (ITI) uses the percentage of credit sales method to estimate bad debts each month and then uses the aging method at year-end. During November, ITI sold services on account for $150,000 and estimated that ³/₄ of one percent of those sales would be uncollectible. At its December 31 year-end, total Accounts Receivable is $83,300, aged as follows: (1) 130 days old, $68,000; (2) 3190 days old, $12,000; and (3) more than 90 days old, $3,300. Experience has shown that for each age group, the average rate of uncollectibility is (1) 12 percent, (2) 24 percent, and (3) 48 percent, respectively. Before the end-of-year adjusting entry is made, the Allowance for Doubtful Accounts has a $1,250 credit balance at December 31.

Innovative Tech Inc. (Ti) uses the percentage of credit sales method to estmate bad debts each month and then uses the aging method at year end. During November, 1 sold ser rces on account or $150,000 and estimated that of one percent of those sales would be uncollectible. At its December 31 year-end, total Accounts Receivable is s83,300, aged as follows: (1) 1-30 days old, $68,ooo; (2) 31-9o days old, $12,000; and 6) more than 9o days old, s3,300 Experience has shown that for each age group, the average rate of uncollectibility is (G) 12 percent,() 24 percent, and G) 48 percent, respectively. Before the end-of-year adjusting entry is made, the Allowance for Doubtful Accounts has a $1,250 credit balance at December 31. woLL , the average rate of uncollectbilty s (1) 12 percent, (2) 24 percent, Required: 1. Prepare the November adjusting entry for bad debts. (af no entry is required for a transaction/cvent, select 1. Prepare the November adjustina en debts. (Jfno en tion/event, select No Journal Entry Required in the first account field.) No ournal En Requred "irn view transaction list view general journal Journal Entry Worksheet Record the adjusting entry for bad debts as of November 30. Date General Journal Debit Credit Nov 30 Enter debits before credits done clear entry record entry 2. Prepare a schedule to estimate an ayproprate year end balance for the Allowance for Doubtful Accounts. 1-30 31-90 90 Total Accounts Receivable Estimated Uncollectible (%) Estimated Uncollectible ($) 0 0