At December 31, the Azuza Company had a balance of \(\$ 754,000\) in its Accounts Receivable account and a credit balance of \(\$ 9,000\) in the Allowance for Doubtful Accounts account. The company aged its accounts as follows:

In the past, the company has experienced credit losses as follows: one percent of current balances, five percent of balances 0-60 days past due, 20 percent of balances 61-180 days past due, and 40 percent of balances over six months past due. The company bases its allowance for doubtful accounts on an aging analysis of accounts receivable.

Required

a. Prepare the adjusting entry to record the allowance for doubtful accounts for the year.

b. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the December 31 balance sheet.

Transcribed Image Text:

Current... 0-60 days past due 61-180 days past due $608,000 88,000 40,000 Over 180 days past due. 18,000 $754,000