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PS. AA (LO2) Rigney Inc. uses the allowance method to estimate uncollectible accounts receivable. The company produced the following aging of the accounts receivable at
PS. AA (LO2) Rigney Inc. uses the allowance method to estimate uncollectible accounts receivable. The company produced the following aging of the accounts receivable at year-end Journalice truncontrolled to be debts Worksheet De 18 B D E G 1 2 0-30 Total 200,000 Number of Days Outstanding 31-60 61-90 91-120 46,000 39,000 23,000 4% 5% 77,000 1% Over 120 15,000 20% 89 Accounts receivable 5 Suncollectible 6 Estimated bad debts a. Tot est. bad debts 59.400 Instructions a. Calculate the total estimated bad debts based on the above information b. Prepare the year-end adjusting journal entry to record the bad debts using the aged uncollectible accounts receivable determined in (a). Assume the current balance in Allowance for Doubtful Ac- counts is an $8,000 debit. c. Of the above accounts, S5.000 is determined to be specifically uncollectible. Prepare the journal entry to write off the uncollectible account d. The company collects $5,000 subsequently on a specific account that had previously been deter- mined to be uncollectible in (c). Prepare the journal entry(ies) necessary to restore the account and record the cash collection. . Comment on how your answers to (a)-(d) would change if Rigney Inc. used 4% of total accounts receivable rather than aging the accounts receivable. What are the advantages to the company of aging the accounts receivable rather than applying a percentage to total accounts receivable
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