P6-3 (Algo) Determining Bad Debt Expense Based on Aging Analysis LO6-2

[The following information applies to the questions displayed below.] Blue Skies Equipment Company uses the aging approach to estimate bad debt expense at the end of each accounting year. Credit sales occur frequently on terms n/60. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, (2) up to one year past due, and (3) more than one year past due. Experience has shown that for each age group, the average loss rate on the amount of the receivable at year-end due to uncollectibility is (a) 7 percent, (b) 10 percent, and (c) 32 percent, respectively.

At December 31, 2019 (end of the current accounting year), the Accounts Receivable balance was $49,600 and the Allowance for Doubtful Accounts balance was $990 (credit). In determining which accounts have been paid, the company applies collections to the oldest sales first. To simplify, only five customer accounts are used; the details of each on December 31, 2019, follow:

B. BrownAccount Receivable
Date	Explanation	Debit	Credit	Balance
03/11/2018	Sale	13,700		13,700
06/30/2018	Collection		4,800	8,900
01/31/2019	Collection		3,600	5,300

D. DonaldsAccount Receivable
Date	Explanation	Debit	Credit	Balance
02/28/2019	Sale	21,400		21,400
04/15/2019	Collection		8,000	13,400
11/30/2019	Collection		4,200	9,200

N. NapierAccount Receivable
Date	Explanation	Debit	Credit	Balance
11/30/2019	Sale	8,200		8,200
12/15/2019	Collection		2,900	5,300

S. StrothersAccount Receivable
Date	Explanation	Debit	Credit	Balance
03/02/2017	Sale	5,800		5,800
04/15/2017	Collection		5,800	0
09/01/2018	Sale	10,100		10,100
10/15/2018	Collection		4,600	5,500
02/01/2019	Sale	22,100		27,600
03/01/2019	Collection		6,000	21,600
12/31/2019	Sale	2,600		24,200

T. ThomasAccount Receivable
Date	Explanation	Debit	Credit	Balance
12/30/2019	Sale	5,600		5,600

Required: 1. Compute the total accounts receivable in each age category. Amount Not yet due Up to one year past due More than one year past due Total accounts receivable 2. Compute the estimated uncollectible amount for each age category and in total. Amount Not yet due Up to one year past due More than one year past due Total CA Journal entry worksheet Record the adjusting entry for bad debt expense at December 31, 2019. Note: Enter debits before credits. Transaction General Journal Debit Credit Record entry Clear entry View general journal 4. Show how the amounts related to accounts receivable should be presented on the 2019 income statement and balance sheet. Complete this question by entering your answers in the tabs below. Income Stat Bal Sheet Show how the amounts related to accounts receivable should be presented on the 2019 income statement. BLUE SKIES EQUIPMENT COMPANY Income Statement (partial) For the Year Ended December 31, 2019 Operating expenses: 4. Show how the amounts related to accounts receivable should be presented on the 2019 income statement and balance sheet. Complete this question by entering your answers in the tabs below. Income Stat Bal Sheet Show how the amounts related to accounts receivable should be presented on the 2019 balance sheet. (Amounts to be deducted should be indicated by a minus sign.) BLUE SKIES EQUIPMENT COMPANY Balance Sheet (partial). As of December 31, 2019 Current assets