Question

Accounting for Receivables.

The following information is provided about the outstanding Accounts Receivable of the Dr. Doofenshmirtz Corporation. They total $120,000. Of these, $60,000 have been outstanding 0-30 days, $40,000 have been outstanding 31-60 days, and $20,000 have been outstanding for more than 60 days. Of the 0-30 day category, 6% are expected to be uncollectible, of the 31-60 day category, 8% are expected to be uncollectible, and of the over-60-day group, 20% are expected to be uncollectible.

3) One of Doofenshmirtz Corporation’s best customers, super-spy Perry the Platypus, has gone bankrupt. He owes the firm $1,700 for goods purchased on credit and will be unable to pay. Record this event.

Answer 1

Total Receivables	$ 120000
Aging break-up of receivables
0-30 days	60000
31-60 days	40000
More than 60 days	20000

Expected uncollectible	Receivables	Expected Uncollectible %	Expected Uncollectible amount
0-30 days	60000	6%	3600
31-60 days	40000	8%	3200
More than 60 days	20000	20%	4000
Total			10800

Total amount to be transferred to Provision for Doubtful debts = 10800

Entry will be :
	Dr	Cr
Provision for loss account	10800
Provision for doubtful debts account.		10800

Event:	One of Doofenshmirtz Corporation’s best customers, super-spy Perry the Platypus, has gone bankrupt. He owes the firm $1,700 for goods purchased on credit and will be unable to pay. Record this event.
	This amount ($ 1700) should be transferred to bad debts written off account .

Record this event as follows:
Entry will be :
	Dr	Cr
Bad debts written off	1700
Accounts Receivables		1700

Notes.	Doubtful accounts represents a figure the company will expect to not receive from customers.
	A doubtful debt, as its name suggests, is an accounts receivable that the business is not sure whether it will receive. The accounting entry will require a debit to be made in the provision for loss account and a credit entry to be made in the provision for doubtful debts account.
	A bad debt is referred to as an amount that most certainly will not be received by the business. Once a bad debt is identified, it will be removed from the accounts receivable account with a credit entry and will be debited to the bad debts expense account.