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P7-3 Fortini Corporation had record sales in 2019. It began 2019 with an Accounts Receivable balance of $475,000 and an Allowance for Doubtful Accounts of
P7-3 Fortini Corporation had record sales in 2019. It began 2019 with an Accounts Receivable balance of $475,000 and an Allowance for Doubtful Accounts of $33,000. Fortini recognized credit sales during the year of $6,675,000 and made monthly adjusting entries equal to 0.5% of each month's credit sales to recognize bad debt expense. Also, during the year, the company wrote off $35,500 of accounts that were deemed to be uncollectible, although one customer whose $4,000 account had been written off surprised management by paying the amount in full in late September. Including this surprise $4,000 receipt, $6,568,500 cash was collected on account in 2019. In preparation for the audited year-end financial statements, the controller prepared the following aged listing of the receivables at December 31, 2019: Days Account Outstanding Amount Probability of Collection Less than 16 days $270,000 97% Between 16 and 30 days 117,000 92% Between 31 and 45 days 80,000 80% Between 46 and 60 days 38,000 70% Between 61 and 75 days 20,000 50% Over 75 days 25,000 0% $550,000 Instructions (a) Reconcile the 2019 opening balance of $475,000 in Accounts Receivable to the $550,000 ending balance on the controller's aged listing. (b) Determine the balance in Allowance for Doubtful Accounts at December 31, 2019 before the adjusting journal entry required by part c) below. (c) Based on your analysis of the aged listing of the receivables, prepare the adjusting entry to bring the Allowance for Doubtful Accounts to its proper balance at year-end
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