Important information about Adjusting entries for Bad Debt Expense

Please see the attached file.

7. The following information is provided for the Lurkins Company as of December 31, 2006, before adjusting entries were made.

Net credit sales $4,000,000
Allowance for Uncollectible Accounts
(credit balance) 4,000

Management prepared the following aging of accounts receivable at
December 31, 2006.
Percentage
Age Total Estimated Uncollectible
Current $350,000 10%
31-60 days 100,000 15%
61-90 days 80,000 20%
91-120 days 70,000 30%
Over 120 days 40,000 50%

Required:

a. Prepare the adjusting entry to record Bad Debt Expense at
December 31, 2006.
b. What is the ending balance in the Allowance for Uncollectible Accounts
after the adjusting entry on December 31, 2006, has been made?
c. Determine Net Accounts Receivable at December 31, 2006, before the
adjusting entry is made.
d. Determine Net Accounts Receivable at December 31, 2006, after the adjusting entry has been made.
e. How would your entry be affected in a. above if the allowance account contained a debit balance for $4000 before the adjusting entry is recorded (instead of a credit).

Attachments

Solution Summary

This posting contains a formatted MS Excel spreadsheet which illustrates how to create adjusting entries for bad debt expense, and for the recording of uncollectable accounts.