Innovative Tech Inc. (ITI) uses the percentage of credit sales method to estimate bad debts each month and then uses the aging method at year-end. During November, ITI sold services on account for $100,000 and estimated that of one percent of those sales would be uncollectible. At its December 31 year-end, total Accounts Receivable is $89,000, aged as follows: (1) 130 days old, $75,000; (2) 3190 days old, $10,000; and (3) more than 90 days old, $4,000. Experience has shown that for each age group, the average rate of uncollectibility is (1) 10 percent, (2) 20 percent, and (3) 40 percent, respectively. Before the end-of-year adjusting entry is made, the Allowance for Doubtful Accounts has a $1,600 credit balance at December 31.

1) Prepare a schedule to estimate an appropriate year-end balance for the Allowance for Doubtful Accounts.

	130	3190	> 90	Total
Accounts Receivable				$0
Estimated Uncollectible (%)
Estimated Uncollectible ($)				$0

	2) Prepare the December 31 adjusting entry. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

No	Date	General Journal	Debit	Credit
1	December 31	Bad Debt Expense
		Allowance for Doubtful Accounts

3) Show how the various accounts related to accounts receivable should be shown on the December 31 balance sheet.

Innovative Tech Inc. (ITI)
Balance Sheet (partial)
At December 31
Accounts Receivable	$89,000
Allowance for Doubtful Accounts
Accounts Receivable, Net of Allowance