Question 14

A company has the following unadjusted account balances at December 31, of the current year; Accounts Receivable of $185,700 and Allowance for Doubtful Accounts of $1,600 (credit balance). The company uses the aging of accounts receivable to estimate its bad debts.

The following aging schedule reflects its accounts receivable at the current year-end:

Account Age

Balance

Estimated Uncollectible Percentage

Current (not yet due)

1 - 30 days past due

31 - 60 days past due

61 - 90 days past due

Over 90 days past due

$ 96,000

64,000

16,000

6,500

3,200

1 %

3.5 %

12 %

42 %

67 %

Total

$ 185,700

Required:

1.Calculate the amount of the Allowance for Doubtful Accounts that should appear on the December 31, of the current year, balance sheet.

2.Prepare the adjusting journal entry to record bad debts expense for the current year.