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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

AGING ACCOUNTS RECEIVABLE An analysis of the accounts receivable of Johnson Company as of December 31, 20--, reveals the following:

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REQUIRED

  1. 1. Prepare an aging schedule as of December 31, 20--, by adding the following column to the three columns shown above: Estimated Amount Uncollectible.
  2. 2. Assuming that Allowance for Doubtful Accounts had a credit balance of $620 before adjustment, record the end-of-period adjusting entry in general journal form to enter the estimate for uncollectible accounts.

1.

To determine

Create an aging schedule as of December 31, 20—to calculate the estimated amount of uncollectible accounts.

Explanation

Aging of receivables method:

A method of estimating the uncollectible receivables, based on the age of individual accounts receivable, is known as aging of receivables method. Under this method, the estimated bad debts would be treated as a target allowance balance.

Allowance for doubtful accounts:

Allowance for doubtful accounts is a contra asset account, which is related to accounts receivable. Allowance for doubtful accounts are generally created to record the estimated bad debt expense raise from the credit sales.

Create an aging schedule as of December 31, 20—to calculate the estimated amount of uncollectible accounts:

 Age IntervalBalanceEstimated Percent UncollectibleEstimated Amount Uncollectible
  (a)(b)(c = a × b)
1Not yet due$65,000    2%$1,300

2.

To determine

Prepare the adjusting entry to record the estimate amount for uncollectible accounts.

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