Question

Winfrey Designs had an unadjusted credit balance in its Allowance for Doubtful Accounts at December 31, 2017, of $2,200.

Required:
a. Prepare the adjusting entry assuming that Winfrey estimates uncollectible accounts based on an aging analysis as follows. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

December 31, 2017 Accounts Receivable			Age of Accounts Receivable	Expected Percentage Uncollectible
$	148,000		Not due (under 30 days)		1	%
	43,000		1 to 30 days past due		4	%
	10,000		31 to 60 days past due		10	%
	2,400		Over 60 days past due		60	%

1

Record the estimate for uncollectible accounts.

b. During 2018, credit sales were $1,406,000; sales discounts taken were $26,000; accounts receivable collected were $1,175,400; and accounts written off during the year totalled $28,000. Prepare the adjusting entry required on December 31, 2018, to estimate uncollectible receivables assuming it is based on the following aging analysis. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

December 31, 2018 Accounts Receivable			Age of Accounts Receivable	Expected Percentage Uncollectible
$	280,000		Not due (under 30 days)		1	%
	87,000		1 to 30 days past due		4	%
	24,000		31 to 60 days past due		10	%
	15,000		Over 60 days past due		60	%

1

Record the estimate for uncollectible accounts.

c. Show how accounts receivable would appear on the December 31, 2018, balance sheet.

Partial balance sheet

assets

current assets

Answer 1

Solution a:

Computation of Allowance for Uncollectible Accounts - 2017
Ageing	Accounts Receivables	% Uncollectible	Required Allowance
Not Due	$148,000.00	1%	$1,480.00
1 to 30 days past due	$43,000.00	4%	$1,720.00
31 to 60 days past due	$10,000.00	10%	$1,000.00
Over 60 days past due	$2,400.00	60%	$1,440.00
Total	$203,400.00		$5,640.00

Journal Entries - Winfrey Designs
Date	Particulars	Debit	Credit
31-Dec-17	Bad debts Expense Dr ($5,640 - $2,200)	$3,440.00
	To Allowance for doubtful accounts		$3,440.00
	(To record bad debts expense)

Solution b:

Computation of Allowance for Uncollectible Accounts - 2018
Ageing	Accounts Receivables	% Uncollectible	Required Allowance
Not Due	$280,000.00	1%	$2,800.00
1 to 30 days past due	$87,000.00	4%	$3,480.00
31 to 60 days past due	$24,000.00	10%	$2,400.00
Over 60 days past due	$15,000.00	60%	$9,000.00
Total	$406,000.00		$17,680.00

Journal Entries - Winfrey Designs
Date	Particulars	Debit	Credit
31-Dec-18	Bad debts Expense Dr ($17,680 + $28,000 - $5,640)	$40,040.00
	To Allowance for doubtful accounts		$40,040.00
	(To record bad debts expense)

Solution c:

Winfrey Designs
Balance Sheet (Partial) As of Dec 31, 2018
Particulars		Amount
Current Assets:
Accounts receivables, Gross	$406,000.00
Allowance for doubtful accounts	-$17,680.00
Accounts receivables, net		$388,320.00