You are an accountant at company XYZ, which has a fiscal year ending on December 31. It
Question:
You are an accountant at company XYZ, which has a fiscal year ending on December 31. It is now December 31, 2022, and you are getting ready to record the adjusting journal entry for this year's bad debt expense. The credit department has prepared for you a list of your accounts receivable with their respective ages.
Accts Receivable as of 12/31/2022 | Amounts | Age |
---|---|---|
A | $58,000 | Not yet due |
B | $67,000 | 11 days past due |
C | $12,000 | 39 days past due |
D | $16,500 | 51 days past due |
E | $4,000 | 95 days past due |
F | $1,500 | 300 days past due |
The credit department estimates the following percentages of uncollectible accounts receivable by age:
Status | Estimated % Uncollectible A/R |
---|---|
Not yet due | 1.5% |
1-30 days past due | 5.00% |
31-90 days past due | 15% |
91-180 days past due | 50% |
> 180 days past due | 85% |
You then inspect that accounting records for the year and not that during 2022, the company had write-offs of $10,400 and recoveries of $100. The beginning of the year's Allowance for Doubtful Accounts (AFDA) had a credit balance of $9,070 (as of 01/01/2022)
You also note that total credit sales during 2022 were $710,000. The credit department informs you that historically, 1.75% of credit sales have proven to be uncollectible,
REQUIRED
A) Using the aging method of estimating uncollectible accounts, what is the ending balance for the Allowance for Doubtful Accounts and the resulting Bad Debt Expense for 2022?
B) Suppose that XYZ company uses the percent of sales method to estimate uncollectible accounts. What is the Bad debt expense for 2022 and the resulting Allowance for doubtful accounts - ending balance?
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones