Tableau DA 7-3: Mini-Case, Aging of receivables method and adjusting entries LO P3

The manager asks you to assist her with the data analytics on bad debts expense at year-end. To do this, you access the following Tableau Dashboard for your company.

Make up of current assets:

Cash: $732,000

Accounts Receivable: $1,220,000

Inventory: $1,708,000

Supplies: $476,000

Accounts Receivable by Age

Over 90 days past due: $12,000

61-90 days past due: $38,000

31-60 past due: $86,000

1-30 days past due: $254,000

Not yet due: $830,000

Percent Uncollectible by Age

Not yet due = 2%

1-30 days past due = 3%

31-60 days past due = 7%

61-90 days past due = 33%

Over 90 days past due = 68%

Make up Total Sales

Cash sales = $2,250,000

Credit sales= $7,150,000

Percent Uncollectible by Accounts

Credit Sales= 1%

Accounts Receivable = 5%

1. Estimate the balance of the Allowance for Doubtful Accounts using aging of accounts receivable. 2. Make the adjusting entry to record Bad Debts Expense assuming the unadjusted balance in the Allowance for Doubtful Accounts is a $5,000 credit and use of the aging of accounts receivables method. 3. Make the adjusting entry to record Bad Debts Expense assuming the unadjusted balance in the Allowance for Doubtful Accounts is an $8,000 debit and use of the aging of accounts receivables method. 4. Based on further analysis, assume we find that the percentages in the graphic Percent Uncollectible by Age are too high. When alerting the manager, she responds that this is intentional. What are the income statement impacts from the overstated percentages?