Innovative Tech (ITI) uses the percentage of credit sales method toestimate bad debts each month and then uses the aging method atyear-end. During November 2010 iti sold services on account for$100,000 and estimated that .5% of those sales would beuncollectible. at its december 31 year end total accountsreceivable is 89,000 aged as follows: (1) 1-30 days old, 75,000,(2) 31-90 days old, $10,000 and (3) more than 90 days old, $4,000.experience has shown that for each age group the average rate ofuncollectibility is (1) 1 percent (2) 15 percent and (3) 40 percentrespectively, before the end of year adjusting entry is made, theallowance for doubtful accounts has a $1,600 credit balance atdecember 31, 2010.
1. prepare the november 2010 adjusting entry for bad debts.
2. prepare a schedule to estimate an appropriate year-end balancefor the allowance for doubtful accounts.
3. prepare the december 31, 2010 adjusting entry
4. show how the various accounts related to accounts receivableshould be shown on the december 31, 2010 balance sheet.
1. prepare the november 2010 adjusting entry for bad debts.
2. prepare a schedule to estimate an appropriate year-end balancefor the allowance for doubtful accounts.
3. prepare the december 31, 2010 adjusting entry
4. show how the various accounts related to accounts receivableshould be shown on the december 31, 2010 balance sheet.
Related questions
Kiley Company had a $900 credit balance in Allowance for Doubtful Accounts at December 31, 2005, before the current year's provision for uncollectible accounts. An aging of the accounts receivable revealed the following:
| Estimated Percentage | ||
| Uncollectible | ||
| Current Accounts | $120,000 | 1% |
| 1-30 days past due | 12,000 | 3% |
| 31-60 days past due | 10,000 | 6% |
| 61-90 days past due | 5,000 | 12% |
| Over 90 days past due | 8,000 | 30% |
| Total Accounts Receivable | $155,000 | |
Instructions
Please identify each of your answers with the letter of the transactions you are journalizing.
(a)Prepare the adjusting entry on December 31, 2005, to recognize bad debts expense.
(b)Assume the same facts as above except that the Allowance for Doubtful Accounts account had a $700 debit balance before the current year's provision for uncollectible accounts. Prepare the adjusting entry for the current year's provision for uncollectible accounts.
(c)Assume that the company has a policy of providing for bad debts at the rate of 1% of sales, that sales for 2005 were $500,000, and that Allowance for Doubtful Accounts had a $550 credit balance before adjustment. Prepare the adjusting entry for the current year's provision for bad debts.
| The A.T. Cross Company is well known for its Crosspens. The company recently reported the following amounts in itsunadjusted trial balance as of December 31, 2010.
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