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Hachey Company: Uncollectibles and Bad Debts Expense

Hachey Company has accounts receivable of $95,100 at March 31, 2007. An analysis of the accounts shows these amounts. Prepare entries for recognizing accounts receivable.

Balance, March 31
Month of Sale 2007 2006
March $65,000 $75,000
February 12,600 8,000
December and January 10,100 2,400
November and October 7,400 1,100
$95,100 $86,500

Credit terms are 2/10, n/30. At March 31, 2007, there is a $2,200 credit balance in Allowance for Doubtful Accounts prior to adjustment. The company uses the percentage of receivables basis for estimating uncollectible accounts. The company's estimates of bad debts are as shown on page 402.

Estimated Percentage
Age of Accounts Uncollectible
Current 2%
1-30 days past due 7
31-90 days past due 30
Over 90 days 50

(a) Determine the total estimated uncollectibles.
(b) Prepare the adjusting entry at March 31, 2007, to record bad debts expense.
(c) Discuss the implications of the changes in the aging schedule from 2006 to 2007.

Solution Summary

This is a tutorial providing guidelines on how to prepare entries for recognizing accounts receivable.