Help voodoo adjust for uncollectible accounts using

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Unformatted text preview: Help Voodoo adjust for uncollectible accounts using the percent of accounts receivable method. Allowance method--aging At the end of the year Split Six Company has credit sales of $100,000. At the end of the year (before adjustments) the allowance for uncollectible accounts has a credit balance of $220. The ending balance in accounts receivable is $23,000. Split Six has produced the following aging schedule: Age < 3 months 3 - 6 months 6 - 12 months Total Accounts Uncollectible receivable estimate (%) Uncollectible estimate ($) $16,500 2% $330 4,500 5% 225 2,000 10% $23,000 200 $755 Allowance method • Journal entries associated with the allowance method: - Recording the period’s estimate of uncollectible accounts. Writing off specific accounts when they go bad. ✓ Assume Customer A goes bankrupt and management decides Customer A’s accounts receivable balance of $100 will never be collected. - Collecting a previously written off account. ✓ Assume management was wrong and two months later customer A finds a way to pay his bill. Allowance method • Journal entries associated with the allowance method: - Recording the period’s estimate of uncollectible accounts. Writing off specific accounts when they go bad. ✓ Assume Customer A goes bankrupt and management decides Customer A’s accounts receivable balance of $100 will never be c...
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This document was uploaded on 02/17/2014 for the course ACCTG 215 at University of Washington.

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