Facebook uses the balance sheet approacy to estimate uncollectible accounts expense. At year-end an aging of the accounts receivable produced the following five grouping: Groups Accounts receivable by age Age group total Estimated Uncollectible accounts a. Not yet due $400,000 b. 1-30 days 90,000 c. 31-60 days 40,000 d. 61-90 days 20,000 e. Over 90 days past due 50,000 Total $600000 On the basis of past experience, the company estimated the percentage probability uncollectible for the above five age groups to be as follows: a, 1%; Group b, 2%; Group c, 9%; Group d, 15%; and Group e, 40%. a) Compute the estimated amount of uncollectible accounts based on the above classification by age group. Show your calculation in the table provided above. Please also show the total estimated uncollectible accounts. b) The allowance for doubtful accounts before adjustments at December 31,2020 showed a credit balance of $2500. Prepare the adjusting entry needed to bring the Allowance Accounts to the proper amount on December 31,2020.
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.
. Facebook uses the
|
Groups |
Accounts receivable by age |
Age group total |
Estimated Uncollectible accounts |
|
a. |
Not yet due |
$400,000 |
|
|
b. |
1-30 days |
90,000 |
|
|
c. |
31-60 days |
40,000 |
|
|
d. |
61-90 days |
20,000 |
|
|
e. |
Over 90 days past due |
50,000 |
|
|
|
Total |
$600000 |
|
On the basis of past experience, the company estimated the percentage probability uncollectible for the above five age groups to be as follows: a, 1%; Group b, 2%; Group c, 9%; Group d, 15%; and Group e, 40%.
- a) Compute the estimated amount of uncollectible accounts based on the above classification by age group. Show your calculation in the table provided above. Please also show the total estimated uncollectible accounts.
- b) The allowance for doubtful accounts before adjustments at December 31,2020 showed a credit balance of $2500. Prepare the
adjusting entry needed to bring the Allowance Accounts to the proper amount on December 31,2020.
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Date |
Debit |
Credit |
Db |
Cr |
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