Troy Supply Corporation

Troy Supply Corporation is a privately-held company operating in Ohio since 1983. Troy sells to all of its customers on a credit basis, requiring payment within 30 days. Troy uses the allowance method to estimate the amount currently uncollectible for its accounts receivable. During 2020, Troy recorded a monthly provision of 1% of credit sales of as an estimate for uncollectible accounts receivable. However, at year-end, an aging of accounts receivable is prepared and the allowance for uncollectible accounts is adjusted based on an analysis of that aging. At December 31, 2019, the adjusted balance of the allowance for uncollectible accounts was $21,300, and the balance of accounts receivable was $140,700.

During 2020, Troy wrote-off $12,100 of customer accounts that were deemed to be uncollectible, due to customers declaring bankruptcy or experiencing financial difficulties so severe that extensive collection efforts were not successful. One customers account with a $4,100 balance, which had been written-off in April 2019, was subsequently collected from the customer in November 2020.

Troy maintained the same monthly provision of 1% of credit sales throughout all of 2020. Monthly credit sales for 2020 are as follows:

January $ 38,800

February 44,700

March 27,600

April 20,000

May 23,700

June 32,000

July 49,400

August 46,100

September 43,900

October 41,400

November 42,100

December 40,300

Total cash collections of accounts receivable during 2020 (not including the collection of the previously written-off account) were $430,600.

In preparation for its year-end closing process, Troys controller prepared the following aging of accounts receivable as of December 31, 2020, assigning probabilities of collection based on discussions with Troys credit manager:

Percentage of

Age of Account Receivable Accounts Receivable Probability of Collection

0-30 days past due 70% 95%

31-60 days past due 15% 70%

61-90 days past due 10% 50%

Greater than 90 days past due 5% 10%

Requirements

b) Prepare the year-end adjusting journal entry to record bad debt expense based on the

December 31, 2020 aging of accounts receivable.