Your company sold goods on credit to customers. The following shows the aging schedule for the company. Please prepare the journal entries to reflect the creation of the doubtful accounts using the allowance method. Age Group Balance Probability of Non-Collection 0 – 30 days past due $265,000 5% 31 – 60 days past due $120,000 3% 61 – 120 days past due $60,000 5% 121 – 180 days past due $94,000 12% Over 180 days past due $46,000 30%
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.
- Your company sold goods on credit to customers. The following shows the aging schedule for the company. Please prepare the
journal entries to reflect the creation of the doubtful accounts using the allowance method.
Age Group Balance Probability of Non-Collection
- 0 – 30 days past due $265,000 5%
- 31 – 60 days past due $120,000 3%
- 61 – 120 days past due $60,000 5%
- 121 – 180 days past due $94,000 12%
- Over 180 days past due $46,000 30%
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