Credit Losses Based on Accounts Receivable Hunter, Inc., analyzed its accounts receivable balances at December 31, and arrived at the aged balances listed below, along with the percentage that is estimated to be uncollectible: Age Group Balance Probability ofNoncollection 0–30 days past due $90,000 1% 31–60 days past due 20,000 2% 61–120 days past due 11,000 5% 121–180 days past due 6,000 10% Over 180 days past due 6,000 25% $133,000 The company handles credit losses using the allowance method. The credit balance of the Allowance for Doubtful Accounts is $820 on December 31, before any adjustments. Prepare the adjusting entry for estimated credit losses on December 31. Prepare the journal entry to write off the Rose Company’s account on April 10 of the following year in the amount of $650. a. General Journal Date Description Debit Credit Dec.31 AnswerBad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable - Rose Company Answer Answer AnswerBad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable - Rose Company Answer Answer To record allowance for credit losses. b. General Journal Date Description Debit Credit April 10 AnswerBad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable - Rose Company Answer Answer AnswerBad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable - Rose Company Answer Answer To write off Rose Company's account.
Credit Losses Based on Accounts Receivable Hunter, Inc., analyzed its accounts receivable balances at December 31, and arrived at the aged balances listed below, along with the percentage that is estimated to be uncollectible: Age Group Balance Probability ofNoncollection 0–30 days past due $90,000 1% 31–60 days past due 20,000 2% 61–120 days past due 11,000 5% 121–180 days past due 6,000 10% Over 180 days past due 6,000 25% $133,000 The company handles credit losses using the allowance method. The credit balance of the Allowance for Doubtful Accounts is $820 on December 31, before any adjustments. Prepare the adjusting entry for estimated credit losses on December 31. Prepare the journal entry to write off the Rose Company’s account on April 10 of the following year in the amount of $650. a. General Journal Date Description Debit Credit Dec.31 AnswerBad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable - Rose Company Answer Answer AnswerBad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable - Rose Company Answer Answer To record allowance for credit losses. b. General Journal Date Description Debit Credit April 10 AnswerBad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable - Rose Company Answer Answer AnswerBad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable - Rose Company Answer Answer To write off Rose Company's account.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
Question
Credit Losses Based on
Hunter, Inc., analyzed its accounts receivable balances at December 31, and arrived at the aged balances listed below, along with the percentage that is estimated to be uncollectible:
Age Group |
Balance |
Probability of Noncollection |
|---|---|---|
| 0–30 days past due | $90,000 | 1% |
| 31–60 days past due | 20,000 | 2% |
| 61–120 days past due | 11,000 | 5% |
| 121–180 days past due | 6,000 | 10% |
| Over 180 days past due | 6,000 | 25% |
| $133,000 |
The company handles credit losses using the allowance method. The credit balance of the Allowance for Doubtful Accounts is $820 on December 31, before any adjustments.
- Prepare the
adjusting entry for estimated credit losses on December 31.
- Prepare the
journal entry to write off the Rose Company’s account on April 10 of the following year in the amount of $650.
a.
| General Journal | |||
|---|---|---|---|
| Date | Description | Debit | Credit |
| Dec.31 | AnswerBad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable - Rose Company | Answer | Answer |
| AnswerBad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable - Rose Company | Answer | Answer | |
| To record allowance for credit losses. |
b.
| General Journal | |||
|---|---|---|---|
| Date | Description | Debit | Credit |
| April 10 | AnswerBad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable - Rose Company | Answer | Answer |
| AnswerBad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable - Rose Company | Answer | Answer | |
| To write off Rose Company's account. |
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