Question

Ace Inc. had the following balances at December 31, 2018:

Accounts Receivable	$1,500,000 DR
Allowance for Doubtful Accounts	$ 90,000 CR

The following transactions occurred in 2019:

1. Sales for the year totaled $20,000,000. 90% of the sales were on account.
2. Cash collections in the year totaled $17,700,000.
3. During the year, Ace wrote off specific accounts totaling $250,000.
4. A bankrupt customer whose account had been written off in 2014 was able to re-pay $20,000 of its account receivable.
5. During the year, Ace estimated bad debt expense as 1% of credit sales.
6. Ace prepared an accounts receivable aging schedule at December 31, 2019, as follows:

Category	Amount	Estimated % Uncollectible
0 - 30 Days	$620,000	1%
31 - 60 Days	$487,500	5%
61 - 90 Days	$310,000	20%
Over 90 Days	$132,500	40%

7. In the over 90-day category, Ace identified $60,000 of accounts that will not be collected.

Required:

1. Prepare the journal entries to record all of the above transactions.
2. Provide the appropriate balance sheet presentation for accounts receivable at December 31^st, 2019.
3. What is the bad debt expense for 2019?

Answer 1