Exercise 8-5 Waterway Industries has accounts receivable of $98,600 at March 31, 2017. Credit terms are 2/10, n/30. At March 31, 2017, there is a $2,227 credit balance in Allowance for Doubtful Accounts prior to adjustment. The company uses the percentage-of-receivables basis for estimating uncollectible accounts. The company’s estimates of bad debts are as shown below. Balance, March 31 Estimated PercentageUncollectible Age of Accounts 2017 2016 Current $68,400 $69,990 2 % 1–30 days past due 13,700 7,880 5 31–90 days past due 9,700 2,400 28 Over 90 days past due 6,800 1,100 49 $98,600 $81,370 Determine the total estimated uncollectibles. The total estimated uncollectibles $ Prepare the adjusting entry at March 31, 2017, to record bad debt expense. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
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.
Exercise 8-5
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Balance, March 31
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Estimated Percentage
Uncollectible |
||||||
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Age of Accounts
|
2017
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2016
|
|
||||
| Current |
$68,400
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$69,990
|
2 | % | |||
| 1–30 days past due |
13,700
|
7,880
|
5 | ||||
| 31–90 days past due |
9,700
|
2,400
|
28 | ||||
| Over 90 days past due |
6,800
|
1,100
|
49 | ||||
|
$98,600
|
$81,370
|
Determine the total estimated uncollectibles.
| The total estimated uncollectibles | $
|
Prepare the
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