Question

Age of A/R	Total Balance as of 3/31	Estimated Percentage Uncollectable
1-30 Days	$77,300	3%
31-60 Days	$22,900	5%
61-90 Days	$9,400	24%
91+ Days	$7,200	54%
Total Balance	$116,800
1) Prepare the journal entry for bad debt expense on 3/31, assuming a credit (positive) balance of $1,400 in the Allowance for Doubtful Accounts before adjustment.
2) Prepare the journal entry for bad debt expense on March 31st, assuming instead that the company has a debit (negative) balance of $1,400 in the Allowance for Doubtful Accounts before adjustment.
3) On April 5th, a customer’s $1000 accounts receivable balance for Menge company has been declared uncollectable. Record the journal entry to write-off this balance.

Answer 1

Closing amount of Allowance for Doubtful Debts Account required:
Age of A/R	Balance as on 31/3 (A)	Estimated Uncollectable % (B)	Amount of Doubtful debts allowance (AxB)
1-30 days	$77,300	3%	$2,319
31-60 days	$22,900	5%	$1,145
61-90 days	$9,400	24%	$2,256
91+ days	$7,200	54%	$3,888
	$1,16,800		$9,608
			$11,008
1) Amount to be recorded as bad debt expense = Allowance for doubtful debts required - Credit balance already existing in the account
=> Amount to be recorded as bad debt expense = $9,608 - $1,400 = $8,208
Journal entry:
Date	Description	Debit	Credit
31/3	Bad Debts Expense a/c ..	$8,208
	Allowance for Doubtful Debts a/c		$8,208
	(To record bad debts expense)
2) Amount to be recorded as bad debt expense = Allowance for doubtful debts required + Debit balance already existing in the account
=> Amount to be recorded as bad debt expense = $9,608 + $1,400 = $11,008
Journal entry:
Date	Description	Debit	Credit
31/3	Bad Debts Expense a/c ..	$11,008
	Allowance for Doubtful Debts a/c		$11,008
	(To record bad debts expense)
3) Amount to be written off = $1,000
Journal entry:
Date	Description	Debit	Credit
31/3	Allowance for Doubtful Debts a/c	$1,000
	Accounts Receivable - Menge Company		$1,000
	(To write off bad debts $1,000)