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Zuo Software categorizes its accounts receivable into four age groups for purposes of estimating its allowance...

Zuo Software categorizes its accounts receivable into four age groups for purposes of estimating its allowance for uncollectible accounts.

 1. Accounts not yet due = $446,000; estimated uncollectible = 20%.

 2. Accounts 1–30 days past due = $55,800; estimated uncollectible = 23%.

 3. Accounts 31–90 days past due = $44,600; estimated uncollectible = 26%

 4. Accounts more than 90 days past due = $33,500; estimated uncollectible = 29%.


At 12/31/2021, before recording any adjustments, Zuo has a credit balance of $26,800 in its allowance for uncollectible accounts.


Required:

 1. Estimate the appropriate 12/31/2021 balance for Zuo's allowance for uncollectible accounts.

 2. What journal entry should Zuo record to adjust its allowance for uncollectible accounts?

 3. Calculate Zuo's 12/31/2021 net accounts receivable balance.



Solutions

Expert Solution

Answer

  • Requirement 1

Balance in Allowance for uncollectible accounts = Accounts receivables x % uncollectible
= ($446000 x 20%) + (55800 x 23%) + (44600 x 26%) + (33500 x 29%)
= 89200+12834+11596+9715
= $ 123,345 Answer

  • Requirement 2
    >Required adjusted balance in Allowance account = $ 123345 Credit
    >Unadjusted balance in Allowance account = $ 26800 Credit
    >Amount of adjustment required = 123345 – 26800 = $ 96,545

Adjusting entry

General Journal

Debit

Credit

1

Uncollectible account expense (or Bad Debt expense)

$96,545

   Allowance for Uncollectible account

$96,545

  • Requirement 3

Net account receivables balance = Accounts receivables – Allowance account balance
= ($446000 + 55800 + 44600 + 33500) - $ 123345
= $ 579,900 – 123345
= $ 456,555

ekkarill92 answered 2 years ago
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