Chapter 9, Problem 3APSA

Problem 9-3A

Aging accounts receivable and accounting for bad debts

P2 P3

Jarden Company has credit sales of $3,600,000 for year 2017. On December 31, 2017, the company’s Allowance for Doubtful Accounts has an unadjusted credit balance of $14,500. Jarden prepares a schedule of its December 31, 2017, accounts receivable by age. On the basis of past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here.

Required

1. Estimate the required balance of the Allowance for Doubtful Accounts at December 31, 2017, using the aging of accounts receivable method.
2. Prepare the adjusting entry to record bad debts expense at December 31, 2017.

Check (2) Dr. Bad Debts Expense, $27,150

Analysis Component

1. 3. On June 30, 2018, Jarden Company concludes that a customer’s $4,750 receivable (created in 2017) is uncollectible and that the account should be written off. What effect will this action have on Jarden’s 2018 net income? Explain.