THESE ARE EXTRA CREDIT PROBLEMS PROBLEM 7.3B Aging Accounts Receivable; Write-offs Starlight, a Broadway media 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 $500,000 b. 1-30 days past due 110,000 c. 31-60 days past due 50,000 d. 61-90 days past due 30,000 e. Over 90 days past due Total $750,000 60,000 On the basis of past experience, the company estimated the percentages probably uncollectible for the 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 adjustments at December 31 showed credit balance of $4.700. 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 c. Assume that on January 18 of the following year, Starlight learned that an account receivable that had originated on August 1 in the amount of $1,600 was worthless because of the bankruptcy of the client, May Flowers. Prepare the journal entry required on January 18 to write off this account. PROBLEM 7.4B Accounting for Uncollectible Accounts Redstone Mill is a manufacturer that makes all sales on 30-day credit terms. Annual sales are approximately $40 million. At the end of year 1, accounts receivable were presented in the company's balance sheet as follows. Accounts receivable from clients $3,600,000 Less: Allowance for doubtful accounts 80,000 During year 2, $230,000 of specific accounts receivable were written off as uncollectible. Of these accounts written off, receivables totaling $18,000 were subsequently collected. At the end of year 2, an aging of accounts receivable indicated a need for a $150,000 allowance to cover possible failure to collect the accounts currently outstanding. Redstone Mill makes adjusting entries for uncollectible accounts only at year-end. Instructions a. Prepare the following general journal entries. 1. One entry to summarize all accounts written off against the Allowance for Doubtful Accounts during year 2 2. Entries to record the $18,000 in accounts receivable that were subsequently collected. 3. The adjusting entry required at December 31, year 2, to increase the Allowance for Doubtful Accounts to $150,000 2