E9-4 Menge Company has accounts receivable of $93,100 at March 31. Credit terms are 2/10, n/30. At March 31, Allowance for Doubtful Accounts has a credit balance of $1,200 prior to adjustment. The company uses the percentage-of-receivables basis for estimating uncollectible accounts. The company's estimate of bad debts is shown below. Estimated Percentage Uncollectible Age of Accounts 1-30 days 31-60 days 61-90 days Over 90 days Balance, March 31 $60,000 17,600 8,500 7,000 2.0% 5.0% 20.0% 50.0% $93,100 Instructions (a) Determine the total estimated uncollectibles. (b) Prepare the adjusting entry at March 31 to record bad debt expense.
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.
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