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Adjustment for Uncollectible Accounts

Sun Valley Rides is a wholesaler of motorcycle supplies. An aging of the company's accounts receivable on December 31, 20Y3, and a historical analysis of the percentage of uncollectible accounts in each age category are as follows:

Age Interval	Balance	Percent Uncollectible
Not past due	$1,687,500		3	%
130 days past due	750,000		2
3160 days past due	112,500		6
6190 days past due	50,000		18
91180 days past due	25,000		50
Over 180 days past due	12,500		81
	$2,637,500

Assume that the allowance for doubtful accounts for Sun Valley Rides had a negative balance of $(18,285) as of December 31, 20Y3.

Illustrate the effects of the adjustment for uncollectible accounts as of December 31, 20Y3, on the accounts and financial statements.

If no account or activity is affected, select "No effect" from the dropdown list and leave the corresponding number entry box blank. Enter account decreases, cash outflows, and the income statement effects that decrease net income as negative amounts. However, for contra asset accounts, enter account increases as a negative value.

Financial Statement Effects

		Balance Sheet
	Assets	=	Liabilities	+	Stockholders' Equity
Accounts receivableBad debt expenseNo effectNo effect	-	Allowance for doubtful accountsCashNo effectAllowance for doubtful accounts	=	Accounts payableCashNo effectNo effect	+	Capital stockRetained earningsNo effectRetained earnings
Dec. 31.	fill in the blank 5		fill in the blank 6		fill in the blank 7		fill in the blank 8
	Statement of Cash Flows		Income Statement
	FinancingInvestingOperatingNo effectNo effect	fill in the blank 10		Accounts payableBad debt expenseSalesNo effectBad debt expense	fill in the blank 12