Question

The following summarizes the aging of accounts receivable for Johnston Supplies, Inc. as of July 31, 2019:

Number of Days Unpaid	Total Accounts Receivable			Historical % Uncollectible
Not yet due	$	127,200			5	%
1-30 days past due		89,900			10	%
31-60 days past due		54,300			16	%
Over 60 days past due		32,500			37	%

Required:

a. The unadjusted balance of the Allowance for Doubtful Accounts of Johnston Supplies, Inc. is a credit balance in the amount of $29,157 on July 31, 2019. Prepare the required adjusting entry to record Bad Debt Expense for the year.

b. Johnston Supplies, Inc. writes off $3,151 of uncollectible accounts on August 15, 2019. Prepare the required adjusting entry to record the write-off.

c. Use a T-account to determine the account balance in the Allowance for Doubtful Accounts on August 15, 2019.

Answer 1

a. Adjusting entry to record Bad Debt Expense for the year is:

Date	Particulars	L.F	Amount ($)	Amount ($)
July-31	Bad Debt Expense		6,906
	Allowance for doubtful accounts			6,906
	(For bad debt created)

Working:

Age Group	Balance	Probability of	Amount uncollectible
		Noncollection
Not past due	$ 127,200	5%	6,360
1-30 days past due	89,900	10%	8,990
31-60 days past due	54,300	16%	8,688
Over 60 days past due	32,500	37%	12,025
	$ 303,900		$ 36,063
Uncollectibles (Aging achedule)	36,063
Credit Balance in Allowance for dd	29,157
Bad Debts	6,906

b. Adjusting entry to record the write-off is:

Date	Particulars	L.F	Amount ($)	Amount ($)
Aug-15	Allowance for doubtful accounts		3,151
	Account Receivable			3,151
	(For accounts written off as uncollectible)

c. T-account to determine the account balance in the Allowance for Doubtful Accounts on August 15, 2019 is as prepared below:

Allowance for doubtful accounts
Particulars	Amount	Particulars	Amount
Aug-15	3,151	Opening balance	29,157
		Jul-31	6,906
	3,151		36,063
		Closing Balance	32,912