Estimating Bad Debts Expense and Reporting of Receivables

At December $31,2013,$ Sunil Company had a balance of $$75,000$ in its accounts receivable and an unused $($unadjusted year$-$end$)$ balance of $$840$ in its allowance for uncollectible accounts. The company then aged its accounts as follows:

Current $$60,800$

$0-60$ days past due $8,800$

$61-180$ days past due $3,600$

Over $180$ days past due $1,800$

Total accounts receivable $$75,000$

The company has experienced losses as follows: $1\%$ of current balances, $5\%$ of balances $0-60$ days past due, $15\%$ of balances $61-180$ days past due, and $40\%$ of balances over $180$ days past due. The company continues to base its provision for credit losses on this aging analysis and percentages.

a$.$ What amount of bad debts expense does Sunil report on its $2013$ income statement?

$Answer

b$.$ Show how accounts receivable and the allowance for uncollectible accounts are reported in its December $31,2013,$ balance sheet.

Current Assets:

Accounts receivable Answer

Less: Allowance for uncollectible accounts Answer

Accounts receivable, net Answer

c$.$ Set up T$-$accounts for both Bad Debts Expense and for the Allowance for Uncollectible Accounts. Enter any unadjusted balances along with the dollar effects of the information described $($including your results from parts a and b$).$

Bad Debts Expense $($E$)$

Balance Answer

Answer

a$.$ Answer

Answer

Balance Answer

Answer

Allowance for Uncollectible Accts. $($XA$)$

Balance Answer

Answer

a$.$ Answer

Answer

Balance Answer

Answer