In: Accounting
On December 31 an aging of receivables revealed the following
Age in days Amount % Uncollectible
0-30 400,000 0.5%
31-60 100,000 1.5
61-90 60,000 10.0
91-120 20,000 50.0
Over 120 0 99.0
The allowance for doubtful accounts has an unadjusted debit balance of $200.
Record the year end adjusting entry for uncollectible accounts.
Answer :
Year end adjusting entry for uncollectible accounts.
Debit.......Bad Debt Expense........$19,700
Credit....Allowance for doubtful accounts.....$19,700
Explanation:
Age in days Amount % Uncollectible Amount Uncollectible
0-30 400,000 0.5% 2,000
31-60 100,000 1.5% 1,500
61-90 60,000 10.0% 6,000
91-120 20,000 50.0% 10,000
Over 120 0 99.0% 0
Total 580,000 $19,500
Since allowance for doubtful accounts has an unadjusted debit balance of $200, we need to make an adjustment which makes the balance in this account as $19,500. Hence adjustment required = 19500+200 = $19,700