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26 August, 20:57

Dhaliwal Digital categorizes its accounts receivable into three age groups for purposes of estimating its allowance for uncollectible accounts. Accounts not yet due = $180,000; estimated uncollectible = 10%. Accounts 1-45 days past due = $25,000; estimated uncollectible = 20%. Accounts more than 45 days past due = $10,000; estimated uncollectible = 30%. Before recording any adjustments, Dhaliwal has a debit balance of $45,000 in its allowance for uncollectible accounts. Required: 1. Estimate the appropriate 12/31/2021 balance for Dhaliwal's allowance for uncollectible accounts. 2. What journal entry should Dhaliwal record to adjust its allowance for uncollectible accounts?

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  1. 26 August, 22:19
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    1.

    Estimating the balance for allowance for uncollectible accounts on 12/31/2021 is $26,000

    Explanation:

    1.

    Estimating the balance for allowance for uncollectible accounts on 12/31/2021:

    Not yet due

    Estimated amount uncollectible = Amount of Account Receivable * Estimate % uncollectible

    = $180,000 * 10%

    = $18,000

    1 - 45 days

    Estimated amount uncollectible = Amount of Account Receivable * Estimate % uncollectible

    = $25,000 * 20%

    = $5,000

    Over 45 days

    Estimated amount uncollectible = Amount of Account Receivable * Estimate % uncollectible

    = $10,000 * 30%

    = $3,000

    Total estimated amount in Allowance for doubtful debt (Credit balance) = $18,000 + $5,000 + $3,000

    = $26,000

    2.

    The journal entry for adjusting the allowance for uncollectible accounts is shown below:

    December 31, 2021

    Bad debt expense A/c ... Dr $71,000

    Allowance for doubtful accounts A/c ... Cr $71,000

    Working Note:

    Bad debt expense for the present year = Total estimated amount in Allowance for doubtful debt (Credit balance) + Current balance in Allowance for doubtful debt (Debit balance)

    = $26,000 + $45,000

    = $71,000
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