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Mary is making the annual accounts receivable and allowance for doubtful accounts adjustments at year end. The proportion of uncollectible accounts is estimated during the
Mary is making the annual accounts receivable and allowance for doubtful accounts adjustments at year end. The proportion of uncollectible accounts is estimated during the year based on past experience which indicates 1.5% of net credit sales will be uncollectible. Total sales for the year were $2 million, of which 10% were cash transactions. Mary determines that a $10,000 account from Ivan, Inc is uncollectible and will write off this account before making year-end adjustments. Below are the unadjusted account balances: Sales $2,000,000 Sales Returns&Allowances $175,000 Bad debt expense Szero Accounts Receivable $750,000 Sal es Discounts $125,000 Allowance for Doubtful Accounts $16,500 a. Calculate and record the journal entry for the amount of bad debt expense that should have been recorded during the year before making adjusting entries. An accounts receivable aging after writing-off the Ivan account follows: 61-90 Days 1 15,000 91-120 Days Total $740,00 $390,000 % Uncollectible 1% 0-60 Days > 120 Days S25,000 210,000 5% 15% 40% b Prepare an aging and, if the allowance for doubtful accounts balance needs to be adjusted, record the joumal entry Page 10 of 14
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