The chief accountant of Thomas Co. has made the following estimations about the

probability of collection for accounts receivable: 97% for balances under two months

old, 90% for balances two to three months old, and 75% for balances over three

months old. On December 31, 2020, this company had total accounts receivable of

$2,900,000, with $1.000,000 under two months, $1,500,000 two to three months old,

and $400.000 over three months old.

In 2020, the company made credit sales of $5,000,000. Every month, the company

provided allowance for doubtful accounts based on 2% of credit sales. During the year

customer accounts worth $40,000 were considered uncollectible and thus were written

off. In 2020. the firm received $12,000 from accounts written off in prior years. The

allowance for doubtful accounts was recorded as $30,000 on January 1, 2020.

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Instructions:

(a) What is the required balance in Allowance for Doubtful Accounts at December 31,

2020? Show your analysis and calculation.

(b) Prepare the adjusting entry to bring the Allowance for Doubtful Accounts to its

proper balance at year end. Show your analysis and calculation.