SKP Co. Ltd has accounts receivable of $940,450 at April 30. Credit terms are 2/10, n/30. At April 30, Allowance for Doubtful Accounts has a credit balance of $1,120 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. Age of Accounts Balance, April 30 Estimated Percentage Uncollectible 1-30 days $895,000 2.00% 31-60 days 35,300 5.00% 61-90 days 5,900 20.00% Over 90 days 4,250 50.00% Total $940,450 Required: a. Determine the total estimated uncollectible at April 30. b. Calculate the adjusted bad debt expense for the period. c. Prepare the journal entries to account for bad debt expense for the period.
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.
SKP Co. Ltd has
|
Age of Accounts |
Balance, April 30 |
Estimated Percentage Uncollectible |
|
1-30 days |
$895,000 |
2.00% |
|
31-60 days |
35,300 |
5.00% |
|
61-90 days |
5,900 |
20.00% |
|
Over 90 days |
4,250 |
50.00% |
|
Total |
$940,450 |
Required:
a. Determine the total estimated uncollectible at April 30.
b. Calculate the adjusted bad debt expense for the period.
c. Prepare the
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