Chapter 8, Problem 8.7SE

Applying the allowance method (percent-of-receivables) to account for uncollectibles

The Accounts Receivable balance for Field, Inc. at December 31, 2015, was $25,000. During 2016, Field earned revenue of $457,000 on account and collected $326,000 on account. Field wrote off $5,900 receivables as uncollectible. Industry experience suggests that uncollectible accounts will amount to 4% of accounts receivable.

Requirements

1. Assume Field had an unadjusted $2,300 credit balance in Allowance for Bad Debts at December 31, 2016. Journalize Field’s December 31, 2016, adjustment to record bad debts expense using the percent-of-receivables method.

2. Assume Field had an unadjusted $1,900 debit balance in Allowance for Bad Debts at December 31, 2016. Journalize Field’s December 31, 2016, adjustment to record bad debts expense using the percent-of-receivables method.