Question

Manilow Corporation operates in an industry that has a high rate of bad debts. Before any year‐end adjustments, the balance in Manilow’s Accounts Receivable account was $650,000 and Allowance for Doubtful Accounts had a credit balance of $45,500. The year‐end balance reported in the balance sheet for Allowance for Doubtful Accounts will be based on the aging schedule shown below. The amount of accounting receivable write‐offs during the year in the amount of $19,500 has not been recorded yet.

Days Account Outstanding	amount	Probability of collection
less than 16 Days	$325,000	0.95
Between 16- 30 days	156,000	0.90
Between 31-45 Days	78,000	0.85
Between 46-60 days	39,000	0.80
Between 61-75 days	32,500	0.55
Over 75 days	19,500	0

A) what is the journal entry to record the write off of uncollectible account receivable?

​B) what is the appropriate balance for allowance for doubtful accounts at year end (show work)

​C) show how accounts receivabnle would be presented on the balance sheet

​D) what is the additional bad debt expense needs to be recorded? write out the journal entry (show work)

Answer 1

Answer

A. The journal entry to record the write off of uncollectible account receivable

Date	Particulars	Dr	Cr
	Allowances for doubtful accounts	$19500
	Account receivable		$19500
	(To record Doubtful accounts )

B.

The appropriate balance for allowance for doubtful accounts at year end

Days Account Outstanding	Amount	Probability of collection	Probability of Uncollectible	Amount of Uncollectible
less than 16 Days	$325000	0.95	0.05	$16250
Between 16- 30 days	$156000	0.90	0.10	$15600
Between 31-45 Days	$78000	0.85	0.15	$11700
Between 46-60 days	$39000	0.80	0.20	$7800
Between 61-75 days	$32500	0.55	0.45	$14625
Over 75 days	$19500	0	1	$19500
Total				$85475

C.

Accounts receivable would be presented on the balance sheet.

Accounts receivable                        $650000

Less:Provision for bad debts $85475    

Accounts receivable (Net)             $564525

D.

The year-end adjustments will reduce the before-tax income by

=$85475 - $45500

=$39975