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Putnam & Putnam, a legal firm, uses the balance sheet approach to estimate uncollectible accounts expense. At year-end, an aging of the accounts receivable produced

Putnam & Putnam, a legal firm, uses the balance sheet approach to estimate uncollectible accounts expense. At year-end, an aging of the accounts receivable produced the following five groupings:

a. Not yet due $ 250,000
b. 130 days past due 105,000
c. 3160 days past due 40,000
d. 6190 days past due 7,500
e. Over 90 days past due 15,000
Total $ 417,500

On the basis of past experience, the company estimated the percentages probably uncollectible for the above five age groups to be as follows: Group a, 1 percent; Group b, 3 percent; Group c, 10 percent; Group d, 20 percent; and Group e, 50 percent.

The Allowance for Doubtful Accounts before adjustment at December 31 showed a credit balance of $5,900.

Instructions

a.

Compute the estimated amount of uncollectible accounts based on the above classification by age groups.

b.

Prepare the adjusting entry needed to bring the Allowance for Doubtful Accounts to the proper amount.

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