ESTIMATION AND RECORDING OF UNCOLLECTIBLE ACCOUNTS ‘
AGING OF ACCOUNTS RECEIVABLE METHOD
Part 1 ‘ In 2009, Vandolay reported $300,000 in sales. The company’s allowance for doubtful accounts has an unadjusted credit balance of $12,000. Vandolay Industries accountants prepared the following Aging of Accounts Receivable:
| Customer | Total | Number of days unpaid | |||
| 0 30 | 30 60 | 60 90 | Over 90 | ||
| Alpha Sales | $ 700 | $ 700 | |||
| Gamma Manufacturing Co. | 1,900 | $ 1,900 | |||
| Delta Shipping Corp. | 2,200 | $2,200 | |||
| Epsilon Industries | 6,000 | $6,000 | |||
| Theta Manufacturing | 1,800 | 1,800 | |||
| Zeta Industries | 600 | 600 | |||
| Other customers | 136,800 | 88,100 | 26,900 | 9,800 | 12,000 |
| Totals | $150,000 | $90,000 | $30,000 | $12,000 | $18,000 |
Vandolay accountants believe that receivables 0 30 days old have a 2% chance of noncollection. Receivables 30 60 days old have a 4% chance of noncollection. Receivables 60 90 days old have an 8% chance of noncollection. Receivables over 90 days old have a 20% chance of noncollection. The company’s allowance for doubtful accounts has an unadjusted credit balance of $12,000. Prepare the required adjusting journal entry.
| Bad Debt Expense | Allowance for Doubtful Accounts |
HW 8 ‘ 2, CONTINUED
Part 2 ‘ Assume instead that the company’s allowance for doubtful accounts has an unadjusted debit balance of $400. Prepare the required adjusting journal entry.
| Bad Debt Expense | Allowance for Doubtful Accounts | ||||||||||||||||||||||||
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