Green Pastures Equipment Company uses the aging approach to estimate bad debt expense at the end of each accounting year. Credit sales occur frequently on terms n/ 60. The balance of each trade receivable is aged on the basis of three time periods as follows: (1) not yet due, (2) up to one year past due, and (3) more than one year past due. Experience has shown that for each age group, the average bad debt rate on the amounts receivable at year- end due to uncollectibility are (1) 1 percent, (2) 5 percent, and (3) 30 percent, respectively. At December 31, 2014 (end of the current accounting year), the trade receivables balance was $ 45,000, and the unadjusted balance of the allowance for doubtful accounts was $ 1,020 (credit). To simplify, the accounts of only five customers are used; the details of each are given below:
1. Prepare an aging analysis schedule and complete it.
2. Compute the estimated uncollectible amount for each age category and in total.
3. Prepare the adjusting entry for bad debt expense at December 31, 2014.
4. Show how the amounts related to trade receivables should be presented on the statement of earnings for 2014 and the statement of financial position at December 31, 2014.

  • CreatedAugust 04, 2015
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