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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Adjustment for uncollectible account

Using data in Exercise 9-9, assume that the allowance for doubtful accounts for Kirchhoff Industries has a credit balance of $10,112 before adjustment on August 31. Journalize the adjusting entry for uncollectible accounts as of August 31.

To determine

Analysis of receivables method:

A method of determining the estimated uncollectible receivables based on the age of individual accounts receivable is known as analysis of receivables method. This method is otherwise known as aging of receivables method. Under analysis of receivables method, estimated bad debts would be treated as the desired adjusted balance for allowance for doubtful accounts.

Due date:

Due date is the maturity date on note/account, on due date the borrower is supposed to pay the debt.

Past due:

Past due is the number of days of not receiving/making payment on the overdue account.

To Journalize: The adjusting entry for uncollectible as of August 31.

Explanation

Calculate number of days past due for each account.

C Industries Account Past due days
Number of days from March 23 to 31 9 days
Number of days from April 1 to 31 31 days
Number of days from May 1 to 31 31 days
Number of days from June 1 to 30 30 days
Number of days from July 1 to 31 31 days
Number of days from August 1 to 31 31 days
Total 162 days

Table (1)

K Company Account Past due days
Number of days from July 2 to 31 30 days
Number of days from August 1 to 31 31 days
Total 61 days

Table (2)

MC Incorporation Account Past due days
Number of days from July 26 to 31 6 days
Number of days from August 1 to 31 31 days
Total 37 days

Table (3)

S Company Auto Past due days
Number of days from August 4 to 31 28 days
Total 28 days

Table (4)

Past due days has been calculated by omitting the due date but including the date of analysis of August 31.

Determine the number of days each account is past due as of August 31.

Account Balance Due Date Number of days past due
C Industries $30,000 March 22 162 days
K Company $18,000 July 1 61 days
MC Incorporation $9,000 July 25 37 days
R Company $26,400 September 10 Not past due
S Company $46,600 August 3 28 days

Table (5)

Now complete the aging of receivables schedule, by adding the omitted accounts to the bottom of the schedule and update the totals...

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