Question

In: Accounting

aging 26000 2%. 90000 5%. 5000 10% 1900 25% 500 40% Fife Company has the following...

aging 26000 2%. 90000 5%. 5000 10% 1900 25% 500 40%

Fife Company has the following account balances at December 31 of 2019: Accounts Receivable $42,400 and Allowance for Doubtful Accounts $1,600 (credit balance). Fife uses the aging of accounts receivable to estimate bad debts. The following aging schedule reflects the situation at year-end:

  

(1) Calculate the amount of the Allowance for Doubtful Accounts that should appear on the December 31, 2019 Balance Sheet.
(2) Prepare the journal entry to record bad debts expense for the current year.

Solutions

Expert Solution

Answer 1)

Calculation of amount of allowance for doubtful debts that should appear on December 31, 2019

Amount of Accounts receivable

Estimated percentage of uncollectible

Estimated amount of uncollectible

$26,000

2%

$520

$9,000

5%

$450

$5,000

10%

$500

$1,900

25%

$475

$500

40%

$200

Total

$42,400

$2,145

Therefore the amount of allowance for Doubtful accounts that should appear on December 31, 2019 is $ 2,145.

Answer 2)

Journal Entry

Date

Account Titles and Explanations

Debit

Credit

December 31' 2019

Bad debts expense

$545

Allowance for Doubtful accounts

$545

(To record bad debts expense)

Working Note:

Bade debts expense for the year = Amount of allowance for bad debts that should appear on December 31, 2019 – Amount of allowance for bad debts before adjustment

                                                                               = $ 2,145 - $ 1,600

                                                                              = $ 545


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