HANDOUT 2 ESTIMATION AND RECORDING OF UNCOLLECTIBLE ACCOUNTS - AGING OF ACCOUNTS RECEIVABLE METHOD Total Part 1 In Year 1, Vandelay Industries reported $300,000 in sales. The company's allowance for doubtful accounts has an unadjusted credit balance of $12,000. The company prepared the following aging of accounts receivable: Number of days unpaid Customer 0-30 30-60 60-90 Over 90 Alpha Sales $700 $700 Gamma Manufacturing Co. 1.900 $1.900 Delta Shinning Corp 2.200 $2,200 Epsilon Industries 6.000 $6.000 Theta Manufacturing 1.800 1.800 Zeta Industries 600 600 Other customers 248,800 140.100 36.900 29.800 42,000 Totals $262.000 $142.000 $40,000 $32,000 $48.000 2% 4% 8% 20% $16,600 $2,840 $1,600 $2,560 $9,600 The company estimates that receivables 0-30 days old have a 2% chance of noncollection, receivables 30-60 days old have a 4% chance of noncollection, receivables 60-90 days old have an 8% chance of noncollection, and receivables over 90 days old have a 20% chance of noncollection. The company's allowance for doubtful accounts has an unadjusted credit balance of $12,000. Prepare the required adjusting journal entry. Ensure the equation still balances and debits - Credits Assets Liabilities + Stockholders' Equity + Bad Debt Expense (E) - Allowance for Doubtful Accounts (A) + Part 2 Assume instead that the company's allowance for doubtful accounts has an unadjusted debit balance of $400. Prepare the required adjusting journal entry. Ensure the equation still balances and debits -credits Assets Liabilities + Stockholders' Equity + Bad Debt Expense (E) - Al wine Sor Doubtful Account A+