### ALLOWANCE FOR DOUBTFUL ACCOUNTS

At December 31, 20x1, Company T estimated that 6% of the accounts receivable balance would be uncollectible. Company T had \$1,200 credit balance in the allowance for doubtful accounts before this transaction. Prepare the journal entry to record this transaction.

\$45,000 x 6% = \$2,700

Since the allowance for doubtful accounts had \$1,200 credit balance, the following journal entry is required to adjust the balance to \$2,700.

\$2,700 - \$1,200 = \$1,500

 Bad debts expense 1,500 Allowance for doubtful accounts 1,500

### Aging Schedule of Accounts Receivable

Apply different rates of estimated bad debts to accounts receivable based on how long the balances have been outstanding.

At December 31, 20x1, Company T used the aging schedule of accounts receivable to estimate the amount of uncollectible accounts receivable. What is the estimated amount that may not be collectible?

 Customer Accounts Receivable Balance 1 – 30 dayspast due date 31- 90 dayspast due date Over 90 dayspast due date A \$100,000 \$20,000 \$80,000 B \$150,000 \$50,000 \$100,000 C \$200,000 \$140,000 \$60,000 Total \$450,000 \$160,000 \$110,000 \$180,000 % not collectible 9% 20% 30%

 Customer Accounts Receivable Balance 1 – 30 dayspast due date 31- 90 dayspast due date Over 90 dayspast due date A \$100,000 \$20,000 \$80,000 B \$150,000 \$50,000 \$100,000 C \$200,000 \$140,000 \$60,000 Total \$450,000 \$160,000 \$110,000 \$180,000 % not collectible 9% 20% 30% Estimatedamount thatmay not becollectible \$90,400 \$14,400 \$22,000 \$54,000

### Write-off of Accounts Receivable

On March 17, 20x2, Company E was notified that one of the customers went out of business and could not pay any debts. Company E had \$42,000 remaining balance of accounts receivable from that customer. Prepare the journal entry to record this transaction.

 Allowance for doubtful accounts 42,000 Accounts receivable 42,000

### Collection of Previously Written-off Accounts Receivable

On May 12, 20x2, Company G was able to collect \$7,000 from the customer who went out of business in March 20x2. Prepare the journal entries to record this transaction.

 Accounts receivable 7,000 Allowance for doubtful accounts 7,000

 Cash 7,000 Accounts receivable 7,000