S9-8 Applying the allowance method (aging-of-receivables) to account for uncollectibles Learning Objective 3 World Class Work Shoes had the following balances at December 31, 2016, before the year-end adjustments: Accounts Receivable 78,000 The aging of accounts receivable yields the following data: Accounts Receivable Estimated percent uncollectible Allowance for Bad Debts 1,060 Age of Accounts Receivable Over 60 Days $5,000 X 24% 0-60 Days $ 73,000 X 2% Total Receivables $ 78,000 Requirements 1. Journalize World Class's entry to record bad debts expense for 2016 using the aging-of- receivables method. 2. Prepare a T-account to compute the ending balance of Allowance for Bad Debts.

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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.