Rita Inc. made $900,000 in sales during 2016. Twenty-five percent of these were cash sales. During the
Question:
Rita Inc. made $900,000 in sales during 2016. Twenty-five percent of these were cash sales. During the year, $22,500 of accounts receivable were written off as being uncollectible. In addition, $13,500 of the accounts that were written off in 2015 were unexpectedly collected. At its’ year-end December 31, 2016, Timken had $225,000 of accounts receivable. The balance in the Allowance for Doubtful Accounts general ledger account was $13,500 credit at December 31, 2015.
Age (days) ………………………… Accounts
Receivable
1-30 …………………………………….. $ 90,000
31-60 ………………………………….….. 45,000
61-90 ………………………………….….. 22,500
91-120 ……………………………………. 54,000
Over 120 …………………………….….. 13,500
Total …….…………………………….. $225,000
The write-off of $22,500
The recovery of $13,500
Recalculate the balance in the Allowance for Doubtful Accounts general ledger account at December 31, 2016.
The estimated uncollectible accounts at December 31, 2016 are calculated as follows:
Age (days) …………………….... Estimated
Loss
percentage
1-30 …………………………………. 1.5%
31-60 …………………………….……. 3%
61-90 …………………………….……. 4%
91-120 ………………………………… 9%
Over 120……………………….…… 45%
Required
Prepare the adjusting entry required at December 31, 2016.
Financial Reporting and Analysis
ISBN: 978-0078025679
6th edition
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon