Determining estimated uncollectible and adjusting entry
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Leland Company has accounts receivable of $98,100 at March 31. An analysis of the accounts shows the following.
Month of Sale Balance, March 31
March $ 65,000
February 17,600
January 8,500
Prior to January 7,000
$ 98,100
Credit terms are 2/10, n/30. At March 31, Allowance for Doubtful Accounts has a credit balance of $1,200 prior to adjustment. The company uses the percentage of receivables basis for estimating uncollectible accounts. The company's estimate of bad debts is as follows.
Estimated Percentage Age of Accounts Uncollectible
1-30 days 2.0%
30-60 days 5.0%
60-90 days 30.0%
Over 90 days 50.0%
(a) Determine the total estimated uncollectibles.
(b) Prepare the adjusting entry at March 31 to record bad debts expense.
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Solution Summary
The solution explains how to calculate the uncollectible amount using an ageing schedule and the adjusting journal entry
Solution Preview
(a) Determine the total estimated uncollectibles.
The estimated uncollectibles would depend on the age of the account and the % uncollectible.
The March balance of 65,000 would be in 1-30 days and has a 2.0% uncollectible. The uncollectible amount is 65,000X2%= ...
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