See below aging the accounts receivable similar to

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Unformatted text preview: oubtful accounts. (See below) • Aging the Accounts Receivable: Similar to the percentage of accounts receivable method, but determines bad debt amount by evaluating how old the outstanding receivables are. Example: The Company reviews their accounts receivables balances of $40,000, and determines the following information: Age of Receivables Amount Est. % uncollectible Less than 30 days 2% $30,000 31-60 days 5% $ 5,000 61-90 days 3,000 10% $ Over 90 days 50% $ 2,000 Total Amount estimated to be uncollectible: (in the allowance account) Est. $ uncollectible $ 600 $ 250 $ 300 $1,000 $2,150 This amount determines the ENDING BALANCE needed for the Allowance account (a contra asset). Assuming the allowance account had a beginning balance (from a prior year) of $500, what adjusting entry is necessary? Allowance for D 500 BB 1650 Adjustment needed 2,150 Ending Balance The entry to company would need to make is: Bad Debts Expense $ 1,650 Allowance for Doubtful Accounts $ 1,650 Write off of a customer balance: Now suppose a customer with an outstanding balance of $50 files bankruptcy, so the company knows they will not collect on a part...
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This note was uploaded on 01/23/2014 for the course ACG 2021 taught by Professor Linkovich during the Spring '08 term at University of South Florida - Tampa.

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