Question

The following summarizes the aging of accounts receivable for Johnston Supplies, Inc. as of July 31, 2019:

Number of Days Unpaid	Total Accounts Receivable			Historical % Uncollectible
Not yet due	$	128,000			5	%
1-30 days past due		90,700			10	%
31-60 days past due		55,100			16	%
Over 60 days past due		33,300			35	%

Required:

The unadjusted balance of the Allowance for Doubtful Accounts of Johnston Supplies, Inc. is a credit balance in the amount of $29,397 on July 31, 2019. Prepare the required adjusting entry to record Bad Debt Expense for the year.

Johnston Supplies, Inc. writes off $3,231 of uncollectible accounts on August 15, 2019. Prepare the required adjusting entry to record the write-off.

Use a T-account to determine the account balance in the Allowance for Doubtful Accounts on August 15, 2019.

Answer 1

Solution:

Computation of balance of allowance for doubtful accounts
Ageing	Balance	Percentage Uncollectible	Estimated uncollectible amount
Not yet due	$128,000.00	5%	$6,400.00
1-30 days	$90,700.00	10%	$9,070.00
31-60 days	$55,100.00	16%	$8,816.00
Over 60 days	$33,300.00	35%	$11,655.00
Total	$307,100.00		$35,941.00

Adjusting Journal Entries - Johnston Supplies Inc.
Date	Particulars	Debit	Credit
31-Jul-19	Bad debts expense Dr ($35,941 - $29,397)	$6,544.00
	To Allowance for doubtful accounts		$6,544.00
	(To record bad debts expense)

Adjusting Journal Entries
Event	Particulars	Debit	Credit
15-Aug-19	Allowance for doubtful accounts Dr	$3,231.00
	To Accounts receivables		$3,231.00
	(To write off bad debts)

Allowance for doubtful accounts
Date	Debit	Date	Credit
15-Aug-19	$3,231.00	Beg. Bal.	$29,397.00
End bal.	$32,710.00	31-Jul-19	$6,544.00
Total	$35,941.00	Total	$35,941.00