Estimating Uncollectible Accounts, Recording Write-Offs, and Applying an Aging Schedule

At the beginning of 2020, the credit balance in the Allowance for Doubtful Accounts for Master Healthcare Inc. was $200,000. The provision (expense) for doubtful accounts is computed based on a percentage of net credit sales. Total sales revenue for 2020 amounted to $75 million, of which one-third was on credit. Based on the latest available information, the 2020 provision needed for doubtful accounts is estimated to be 0.75% of net credit sales. During 2020, uncollectible receivables amounting to $220,000 were written off.

a. Compute the ending balance in Master Healthcaress Allowance for Doubtful Accounts at December 31, 2020. Allowance for Doubtful Accounts balance, Dec. 31, 2020

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b. Prepare its 2020 entries to write off uncollectible accounts and to recognize bad debt expense.

Cash Accounts Receivable Allowance for Doubtful Accounts Interest Receivable Sales Revenue Sales Returns and Allowances Sales Discount Sales Discount Forfeited Financing Revenue Interest Revenue Cost of Goods Sold Bad Debt Expense Interest Expense N/A

Date	Account Name	Dr.	Cr.
Dec. 31, 2020	?	?	?
	?	?	?
	To write off uncollectible accounts.
Dec. 31, 2020	?	?	?
	?	?	?
	To recognize bad debt expense.

c. At the end of the year, the allowance is estimated based upon the following aging of accounts receivable.

	Accounts	Probability of	Number of
	Receivable	Collection	Items
Less than 30 days	$650,000	95%	2,600
31-90 days	200,000	90%	1,000
91-120 days	110,000	70%	733
Greater than 120 days	40,000	40%	1,600
	$1,000,000

What is the estimated Allowance for Doubtful Accounts balance at December 31, 2020?

Allowance for Doubtful Accounts balance, year-end

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Estimating Uncollectible Accounts, Recording Write-Offs, and Applying an Aging Schedule At the beginning of 2020, the credit balance in the Allowance for Doubtful Accounts for Master Healthcare Inc. was $200,000. The provision (expense) for doubtful accounts is computed based on a percentage of net credit sales. Total sales revenue for 2020 amounted to $75 million, of which one-third was on credit. Based on the latest available information, the 2020 provision needed for doubtful accounts is estimated to be 0.75% of net credit sales. During 2020, uncollectible receivables amounting to $220,000 were written off. a. Compute the ending balance in Master Healthcares's Allowance for Doubtful Accounts at December 31, 2020. Allowance for Doubtful Accounts balance, Dec 31, 2020 $ 0 b. Prepare its 2020 entries to write off uncollectible accounts and to recognize bad debt expense. Date Account Name Dr. Cr. Dec 31, 2020 To write off uncollectible accounts. Dec 31, 2020 To recognize bad debt expense. c. At the end of the year, the allowance is estimated based upon the following aging of accounts receivable. Accounts Probability of Number of Receivable Collection Items Less than 30 days $650,000 95% 2,600 31-90 days 200,000 90% 1,000 91-120 days 110,000 70% 733 Greater than 120 days 40.000 40% 1,600 $1,000,000 What is the estimated Allowance for Doubtful Accounts balance at December 31, 20207 Allowance for Doubtful Accounts balance, year-end $