A Company Has the Following Unadjusted Account Balances at December

Essay

A company has the following unadjusted account balances at December 31,of the current year: Accounts Receivable of $185,700 and Allowance for Doubtful Accounts of $1,600 (credit balance).This company uses the aging of accounts receivable to estimate its bad debts.The following aging schedule reflects its accounts receivable at the current year-end:
$\begin{array}{|l|c|c|} \hline &&\text {Estimated}\\ &&\text {Uncollectible}\\ \hline \text { Account Age } & \text { Balance } & \text { Percentage}\\\hline \text { Current (notyet due) } &\$96,000&1.0\%\\\hline \text { 1 - 30 days past due} &64,000&3.5\\ \hline\text { 31-60 days past due} &16,000&12.0\\\hline \text { 61-90 } &6,500&42.0\\\hline \text { Over 90 days past due } &3,200&67.0\\ \hline \text { Total } &\$185,700\\ \hline \end{array}$

a.Calculate the amount of the allowance for doubtful accounts that should appear on the December 31 of the current year balance sheet.
b Prepare the adjusting journal entry to record bad debts expense for the current year.