The following represents selected information taken from a company’s aging schedule to estimate uncollectible accounts receivable at year end.

Instructions

(a) Calculate the total estimated bad debts based on the above information.

(b) Prepare the year-end adjusting journal entry to record the bad debts using the allowance method and the aged uncollectible accounts receivable determined in (a). Assume the current balance in the Allowance for Doubtful Accounts account is a $3,000 credit.

(c) Of the above accounts, $1,600 is determined to be specifically uncollectible. Prepare the journal entry to write off the uncollectible accounts.

(d) The company subsequently collects $700 on a specific account that had previously been determined to be uncollectible in (c). Prepare the journal entry(ies) necessary to restore the account and record the cash collection.

(e) Explain how establishing an allowance account satisfies the matching principle.

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Number of Days Outstanding 31-60 Total Over 120 61-90 $40,000 0-30 91-120 $10,000 Accounts receivable % uncollectible Estimated bad debts $375,000 $220,000 1% 4% $90,000 $15,000 5% 8% 10% B.