ABC department store’s accountant collected the following data: Allowance for doubtful accounts as at December 31, 2015 had a credit balance of $4,000 before any adjustment. Based on prior statistics, ABC estimated uncollectable accounts receivable for 2016: Age Group % considered uncollectible Not yet due $51,000 1% 1-30 days past due 29,000 3 30-60 days past due 12,000 10 60-90 days past due 3,000 20 Over 90 days past due 5,000 50 Compute the estimated amount of uncollectible accounts based on the above schedule. Prepare the adjusting entry needed to bring the Allowance for Doubtful Accounts to its correct balance. On January 25, 2017, Mr. Brad informed ABC that he will settle his account of $500 on January 27, which he did. ABC originally wrote off the amount due from Mr. Brad as uncollectible. Prepare the journal entries on January 25, and 27.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
ABC department store’s accountant collected the following data:
- Allowance for doubtful accounts as at December 31, 2015 had a credit balance of $4,000 before any adjustment.
- Based on prior statistics, ABC estimated uncollectable
accounts receivable for 2016:
Age Group % considered uncollectible
Not yet due $51,000 1%
1-30 days past due 29,000 3
30-60 days past due 12,000 10
60-90 days past due 3,000 20
Over 90 days past due 5,000 50
- Compute the estimated amount of uncollectible accounts based on the above schedule.
- Prepare the
adjusting entry needed to bring the Allowance for Doubtful Accounts to its correct balance.
- On January 25, 2017, Mr. Brad informed ABC that he will settle his account of $500 on January 27, which he did. ABC originally wrote off the amount due from Mr. Brad as uncollectible. Prepare the
journal entries on January 25, and 27.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
