Question

An aging analysis of Pharoah Company’s accounts receivable at December 31, 2020 and 2021, showed the following:

Accounts Receivable
Number of Days Outstanding Estimated %Uncollectible 2021 2020
0–30 days 3% 126,000 155,000

31–60 days 7% 31,500 77,500
61–90 days 13% 63,000 46,500
Over 90 days 40% 94,500 31,000
Total    $315,000 $310,000

Additional information:

1.		At December 31, 2020, the unadjusted balance in Allowance for Doubtful Accounts was a credit of $6,200.
2.		In 2021, $26,700 of accounts was written off as uncollectible and $2,700 of accounts previously written off was collected.

Record the following:

1.		The adjusting entry on December 31, 2020.
2.		The write off of uncollectible accounts in 2021.
3.		The collection in 2021 of accounts previously written off.
4.		The adjusting entry on December 31, 2021.

Account Titles and Explanation	Debit	Credit
1.
	(To record estimate of uncollectible accounts.)
2.
	(To record writeoff of accounts receivable.)
3.
	(To reverse write off.)
	(To record collection of previously written-off accounts.)
4.
	(To record estimate of uncollectible accounts.)

Answer 1

	Account Titles and Explanation	Debit	Credit
1	Bad debts expense	22320		=28520-6200
	Allowance for Doubtful Accounts		22320
	(To record estimate of uncollectible accounts.)
2	Allowance for Doubtful Accounts	26700
	Accounts Receivable		26700
	(To record writeoff of accounts receivable.)
3	Accounts Receivable	2700
	Allowance for Doubtful Accounts		2700
	(To reverse write off.)
	Cash	2700
	Accounts Receivable		2700
	(To record collection of previously written-off accounts.)
4	Bad debts expense	47455		=51975-(28520-26700+2700)
	Allowance for Doubtful Accounts		47455
	(To record estimate of uncollectible accounts.)

Workings:
2020
Days	Amount	% Uncollectible	Amount Uncollectible
0–30 days	155000	3%	4650
31–60 days	77500	7%	5425
61–90 days	46500	13%	6045
Over 90 days	31000	40%	12400
Total			28520
2021
Days	Amount	% Uncollectible	Amount Uncollectible
0–30 days	126000	3%	3780
31–60 days	31500	7%	2205
61–90 days	63000	13%	8190
Over 90 days	94500	40%	37800
Total			51975