Question

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Daley Company prepared the following aging of receivables analysis at December 31.

				Days Past Due
	Total			0			1 to 30				31 to 60				61 to 90				Over 90
Accounts receivable	$	595,000		$	401,000			$	95,000			$	41,000			$	23,000			$	35,000
Percent uncollectible					3	%			4	%			7	%			9	%			12	%

Exercise 7-8 Aging of receivables method LO P3

a. Complete the below table to calculate the estimated balance of Allowance for Doubtful Accounts using aging of accounts receivable.
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 $4,100 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 $600 debit.

Answer 1

Based on the information available in the question, we can answer as follows:-

Requirement A:-

The estimated balance of Allowance for Doubtful Accounts using Aging of Accounts Receivable method is :-

Daley Company
Estimate of Allowance for Doubtful Accounts
		Days Past due	Days Past due	Days Past due	Days Past due	Days Past due
	Total	0	1-30	31-60	61-90	Over 90
Accounts Receivable	595,000	401,000	95,000	41,000	23,000	35,000
Percentage Uncollectible		3%	4%	7%	9%	12%
Allowance for doubtful accounts	24,970	12,030	3,800	2,870	2,070	4,200

Requirement B:-

The required balance for the Allowance for Doubtful accounts is $24,970 per the calculation above.

The amount of Adjusting entry = $24,970 - $4,100 Credit balance

The amount of adjusting entry = $20,870

The adjusting entry is as follows:-

Particulars	Debit	Credit
Bad Debt Expense A/c Dr.	20,870
To Allowance for Doubtful Accouts		20,870
(To record the Bad Debt expense for the year)

Requirement C:-

The required balance for the Allowance for Doubtful accounts is $24,970 per the calculation above.

The amount of Adjusting entry = $24,970 + $600 Debit balance

The amount of adjusting entry = $25,570

The adjusting entry is as follows:-

Particulars	Debit	Credit
Bad Debt Expense A/c Dr.	25,570
To Allowance for Doubtful Accouts		25,570
(To record the Bad Debt expense for the year)

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