Question

Arundel 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
$290,000	< 30 days old	99.5%
60,000	30 to 60 days old	90.5%
25,000	61 to 120 days old	70.5%
14,000	> 120 days old	10.0%

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

The answer will be 29125.

First we should calculate uncollectable's percentage. In question gave collectable percentage so for the uncollectable percentage simply dedcut it from 100%.

After we will find amount of uncollectable by the formula of Balances x % of uncollectables.

Doller Value	Age of Account	Estimated Collectables	Estimated uncollectable	Amount of uncollectable
290,000	Less Than 30 Days	99.50%	0.50%	1,450
60,000	30 - 60 Days old	90.50%	9.50%	5,700
25,000	61 - 120 Days old	70.50%	29.50%	7,375
14,000	Greater than 120 Days	10.00%	90.00%	12,600
389,000				27,125

The estimated uncollectble will be 27125.

And the allowance account has the debit balance of 2000 at the begining of the year. so this debit balance will add with the estimated uncollectable. if allowance has credit balance it will deduct from the estimated value. So here

27125 + 2000 = 29125