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

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 $ 126,500 2 % 1-30 days past due 89,200 12 % 31-60 days past due 53,600 18 % Over 60 days past due 31,800 35 % Required: The unadjusted balance of the Allowance for Doubtful Accounts of Johnston Supplies, Inc. is a credit balance in the amount of $28,947 on July 31, 2019.

a. Prepare the required adjusting entry to record Bad Debt Expense for the year. Johnston Supplies, Inc. writes off $3,081 of uncollectible accounts on August 15, 2019.

b. Prepare the required adjusting entry to record the write-off.

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

Solutions

Expert Solution

Answer -

1. Answer -

Date

General Journal

Debit

Credit

July 31, 2019

Bad debt expense

$5,065

   Allowance for doubtful accounts

$5,065

Calculation:

Uncollectible:

Not yet due:

= Accounts receivable * Percentage of uncollectible

= $126,500 * 2%

= $2,530

1-30 days past due:

= Accounts receivable * Percentage of uncollectible

= $89,200 * 12%

= $10,704

31-60 days past due:

= Accounts receivable * Percentage of uncollectible

= $53,600 * 18%

= $9,648

Over 60 days past due:

= Accounts receivable * Percentage of uncollectible

= $31,800 * 35%

= $11,130

Total Uncollectible:

= $2,530 + $10,704 + $9,648 + $11,130

= $34,012

Now,

Bad debt expense:

= Total Uncollectible - Unadjusted balance of the allowance of doubtful accounts (credit balance)

= $34,012 - $28,947

= $5,065

2. Answer -

Date

General Journal

Debit

Credit

August 15, 2019

Allowance for doubtful accounts

$3,081

   Accounts receivable

$3,081

3. Answer -

Allowance for Doubtful Accounts

$28,947

Unadjusted balance, July 31, 2019

Write-off, August 15, 2019

$3,081

$5,065

Adjustment, July 31, 2019

$30,931

Balance, August 15, 2019

Calculation:

Balance of the allowance for doubtful accounts on August 15, 2019:

= Unadjusted balance of the allowance of doubtful accounts + Bad debt expense (Adjustment) - Write-off balance

= $28,947 + $5,065 - $3,081

= $30,931

ekkarill92 answered 1 year ago
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