Question

Xanadu Ltd. has accounts receivable totalling $142,800 and a $3,640 credit balance in its Allowance for Doubtful Accounts prior to adjustment on December 31, 2016. The company uses an aging analysis of its receivables to estimate its uncollectible accounts.
The aging analysis shows the following:
Month of Sale Accounts Receivable on December 31st
December ................ $ 91,000
November ................ 26,040
September and October .......... 16,800
July and August ............ 8,960
$142,800
The company’s estimates of bad debts are as follows:
Age of Accounts Estimated % Uncollectible
Current ................. 2%
1–30 days past due ........... 10%
31–90 days past due ............ 25%
Over 90 days past due ........... 40%
Required:
a. Determine the total estimated uncollectibles as at December 31, 2016.
b. Prepare the adjusting entry for the expected Bad Debts Expense as at December 31, 2016.


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  • CreatedJune 11, 2015
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