Question

Exercise 7-7 Aging of receivables method LO P3

Daley Company estimates uncollectible accounts using the allowance method at December 31. It prepared the following aging of receivables analysis.

				Days Past Due
	Total			0			1 to 30				31 to 60				61 to 90				Over 90
Accounts receivable	$	570,000		$	396,000			$	90,000			$	36,000			$	18,000			$	30,000
Percent uncollectible					1	%			2	%			5	%			7	%			10	%

a. Complete the below table to calculate the estimated balance of Allowance for Doubtful Accounts using the aging of accounts receivable method.
b. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $3,600 credit.
c. Prepare the adjusting entry to record bad debts expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $100 debit.

Answer 1

a.

Age on account	Dollar value	Estimated uncollectible	Uncollectible amount
Not yet due	$         396,000	1%	$                                  3,960
1-30 Days	$           90,000	2%	$                                  1,800
31-60 Days	$           36,000	5%	$                                  1,800
61-90 Days	$           18,000	7%	$                                  1,260
More than 90 Days	$           30,000	10%	$                                  3,000
Total uncollectible amount			$                                11,820

b.

Date	Account title	Debit	Credit
	Baddebt expenses ($11,820-$3,600)	$   8,220
	Allowance for doubtful accounts		$   8,220

c.

Baddebt expenses ($11,820+$100)	$ 11,920
Allowance for doubtful accounts		$ 11,920

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