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Grayson Group showed the following unadjusted account balances,
each with a normal balance, at December 31, 2007:

Accounts Receivable $374,000
Allowance for Doubtful Accounts $2,200
Sales (all on credit) $1,125,000
Sales Discounts $17,000

Grayson Group uses an aging analysis to estimate uncollectible
receivables as shown below:

31-Dec-07 Ages of Accounts Estimated
Accounts Receivable Percentage
receivable Uncollectible

$290,000 Not due(under 30 days) 1.00%
$61,000 1 to 30 days past due 4.00%
$19,000 31 to 60 days past due 10.00%
$4,000 over 60 days past due 60.00%

Required:

a. Calculate the amount that should appear in the December 31, 2007 balance
sheet as the allowance for doubtful accounts:____________________________.

b. Calculate the amount that should appear in the income statement for the year
ended December 31, 2007, as a bad debt expense:_______________________.

c. Prepare the December 31, 2007 adjusting entry to record the estimated bad debt
expense for the year just ended.

Date Account Titles and Explanation Debit Credit

d. What is the purpose of the adjusting entry in (c) above?

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This solution is comprised of a detailed explanation to calculate the amount that should appear in the December 31, 2007 balance sheet as the allowance for doubtful accounts.

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Grayson Group showed the following unadjusted account ...

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