Using an Aging Schedule to Account for Bad Debts Carter Company sells on credit wiith terms of n/30. For the $500,000 of accounts at the end of the year that are not overdue, there is a 90 % probability of collection. For the $200,000 of ac that are less than a month past due, Carter estimates the likelihood of collection going down to 70 %. The probability of collecting the $100,000 of accounts more than a month past due is estimated to be 25% Required: 1. Prepare an aging schedule to estimate the amount of uncollectible accounts. Carter Company Aging Schedule to Account for Bad Debts Category Estimated Amount Percent Uncollectible Amount Uncollectible 508,000 10 P Current 50,000 Past due Less than one month 200,000 60.000 30 100,000 75 % More than one month 75,000 s00,000 185,000 Totals 2. On the basis of the schedule in part (1), identify and analyze the adjustment needed to estimate bad debts Assume that the balance in Allowance for Doubtful Accounts is $20,000. Operating Activity Allowance for Doubtful Accounts Increase, Bad Debts Expense Increase Accounts Balance Sheet only Statement(s) How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, 1.e, a decrease, be sure to enter the answer with a minus sign. Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item Income Statement Balance Sheet Stockholders' Revenues Expe Liabilities Equity Assets