Reynolds.com uses the allowance method of accounting for bad debts. The company produced the following aging of the accounts receivable at year-end.

Number of days outstanding

Total 0-30 31-60 61-90 91-120 over 120

Accounts receivable $377,000 222,000 90,000 38,000 15,000 12,000

% uncollected 1% 4% 5% 8% 8% 10%

Estimated bad debts

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 unadjusted balance in Allowance for Doubtful Accounts is a $4,000 debit.

(c) Of the above accounts, $5,000 is determined to be specifically uncollectible. Prepare the journal entry to write of the uncollectible account.

(d) The company collects $5,000 subsequently on a specific account that had previously been determined to be uncollectiblein (c). Prepare the journal entry(ies) necessary to restore the account and record the cash collection.

(e) Comment on how your answers (a)-(d) would change if Reynolds.com used 3% 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.