From its first day of operations to December 31, 2017, Pina Colada Corp. provided for uncollectible accounts receivable under the allowance method: entries for bad debt expense were made monthly based on 2.10% of credit sales, bad debts that were written off were charged to the allowance account, recoveries of bad debts previously written off were credited to the allowance account, and no year-end adjustments were made to the allowance account. Pina's usual credit terms were net 30 days, and remain unchanged.

The balance in Allowance for Doubtful Accounts was $184,500 at January 1, 2017. During 2017, credit sales totalled $9.20 million, interim entries for bad debt expense were based on 2.10% of credit sales, $94,500 of bad debts were written off, and recoveries of accounts previously written off amounted to $15,100. Pina upgraded its computer facility in November 2017, and an aging of accounts receivable was prepared for the first time as at December 31, 

2017.

 

A summary of the aging analysis follows:

Classification by Month of Sale Balance in Each Category Estimated % Uncollectible

November-December 2017 $1,061,000 8%

July-October 2017 650,000 12.3%

January-June 2017 429,500 21%

Before January 1, 2017 159,500 65%

$2,300,000

Based on a review of how collectible the accounts really are in the "Before January 1, 2017" aging category, additional receivables totalling $66,700 were written off as at December 31, 2017. The 65% uncollectible estimate 

therefore only applies to the remaining $92,800 in the category. Finally, beginning with the year ended December 31, 2017, Pina adopted a new accounting method for estimating the allowance for doubtful accounts: it now uses 

the amount indicated by the year-end aging analysis of accounts receivable.

 

Calculate bad debt expense accrual and year end balance for the year ended December 31, 2017. (Hint: In calculating the allowance amount at December 31, 2017, subtract the $66,700 write off of receivables.)

Bad debt expense accrual $ Answer

Year End Balance $ Answer