At September 30, 2012, the accounts of Mountain Terrace Medical Center (MTMC) include the following:
Accounts receivable $145,000
Allowance for uncollectible accounts (credit balance) 3,500
During the last quarter of 2012, MTMC completed the following selected transactions:
Wrote off accounts receivable as uncollectible: Regan, Co., $1,300; Owen Mac, $900; and Rain, Inc., $700.
Recorded uncollectible account expense based on the aging of accounts receivable, as follows:
AGE OF ACCOUNTS
Accounts Receivable 1-30 days 31-60 days 61-90 days over 90 days
$165,000 $97,000 $37,000 $14,000 $17,000
Est. % uncollectible .03% 3% 30% 35%
1. Journalize the transactions.
2. Open the Allowance for uncollectible accounts T-account, and post entries affecting that account. Keep a running balance.
3. Show how Mountain Terrace Medical Center should report net accounts receivable on its December 31, 2012 balance sheet. Use the three line reporting format.
This solution illustrates how to compute the allowance for uncollectible accounts using an aging schedule and how to journalize the necessary transactions.