Question

A company has the following aging schedule of its accounts receivable with the estimated percent uncollectible:______.
Age Group Amount Receivable Estimated Percent Uncollectible
Not yet due $ 175,000 4 %
0-60 days past due $ 40,000 10 %
61-120 days past due $ 10,000 30 %
More than 120 days past due $ 5,000 60 %
Assuming the balance of Allowance for Uncollectible Accounts is $3,000 (credit) before adjustment, which of the following would be recorded in the year-end adjusting entry?

Answer 1

Answer: $14,000

Explanation:

Estimated Uncollectible = (4% * 175,000) + ( 10% * 40,000) + ( 30% * 10,000) + (60% * 5,000)

= 7,000 + 4,000 + 3,000 + 3,000

= $17,000

The credit balance on the Allowance account will be used to account for some of the uncollectibles. The remaining amount will be the year-end adjusting entry;

= 17,000 - 3,000

= $14,000