Question

Baltimore Company uses aging to estimate uncollectibles.  At the end of the fiscal year, December 31, 2018, Accounts Receivable has a balance that consists of:

Dollar Value	Age of Account	Estimated Collectible
$140,000	< 30 days old	98%
60,000	30 to 60 days old	88%
30,000	61 to 120 days old	70%
11,000	> 120 days old	10%

The current unadjusted Allowance for Uncollectible Accounts balance is a debit balance of $2,000 and the Bad Debt Expense accounts has an unadjusted balance of zero. After the adjusting entry is made, what will be the dollar balances in the Allowance for Doubtful Accounts? Round to nearest whole dollar.

Answer 1

Answer)

Calculation of estimated value of uncollectible Accounts

Dollar value	Age of Account	Estimated Collectible (%)	Estimated Uncollectible (%)	Estimated uncollectible amounts
$140,000	< 30 days old	98%	2%	$2,800
$60,000	30 to 60 days old	88%	12%	$7,200
$30,000	61 to 120 days old	llo70%	30%	$9,000
$11,000	> 120 days old	10%	90%	$9,900
Total Estimated value of uncollectible accounts	$28,900

Therefore the estimated value of uncollectible accounts is $ 28,900. Accordingly the allowance for uncollectible account will have a balance of $ 28,900 after the adjustment entry is made.

Estimated Uncollectible (%) = 100% - Estimated Collectible (%)

Just for knowledge: Not to form part of answer

Adjustment Journal entry

Particulars	Debit	Credit
Bad debts expense	$30,900
Allowance for uncollectible account		$30,900
(being provision made against uncollectible accounts)

Amount of bad debts expense = Opening debit balance of allowance for uncollectible accounts + Estimated value of closing uncollectible accounts

                                                                   = $ 2,000 + $ 28,900

                                                                   = $ 30,900.