Calculate the amount of the Allowance

Dec 14th, 2014
RockCafe
Category:
Accounting
Price: $15 USD

Question description

A company uses the aging of accounts receivable method to estimate its bad debts expense. On December 31 of the current year, an aging analysis of accounts receivable revealed the following:

Accounts Receivables  The Account Age  Estimated Uncollectible

$620,000  Not due yet  1%

270,000  1-30 days overdue  5

 145,000  31-60 days overdue  10

55,000  61-90 days overdue  30

32,000   91-120 days overdue  40

18,000  Over 120 days overdue  60

Total of 1,140,000

Using the information in the chart above, complete the following: Calculate the amount of the Allowance for doubtful accounts that should be reported on the current year-end balance sheet.Calculate the amount of the Bad Debts Expense that should be reported on the current year's income statement, assuming that the balance of the Allowance for Doubtful Accounts on January 1 of the current year was $50,000 and that accounts receivable written off during the current year totaled $55,000.Prepare the adjusting entry to record bad debts expense on December 31 of the current year.Show how Accounts Receivable will appear on the current year-end balance sheet as of December 31.

Important: Be sure your submission also shows how you calculated and reached the final total for each of the above questions.


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