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Adjustment for uncollectible accounts

Below is the aging of receivables schedule for Evers Industries.

Aging of Receivables Schedule
July 31
Customer Balance Not
Past Due 1-30
Days
Past Due 31-60
Days
Past Due 61-90
Days
Past Due Over 90
Days
Past Due
Subtotals 1,050,000 600,000 220,000 115,000 85,000 30,000
Boyd Industries 36,000 36,000
Hodges Company 11,500 11,500
Kent Creek Inc. 6,600 6,600
Lockwood Company 7,400 7,400
Van Epps Company 13,000 13,000
Totals 1,124,500 607,400 233,000 121,600 96,500 66,000
Percentage uncollectible 1% 3% 12% 30% 75%
Allowance for Doubtful Accounts 106,106 6,074 6,990 14,592 28,950 49,500

Assume that the allowance for doubtful accounts for Evers Industries has a credit balance of $8,240 before adjustment on July 31.
Journalize the adjusting entry for uncollectible accounts as of July 31. If an amount box does not require an entry, leave it blank.

DateAccountDebitCredit
July 31

1 answer

To journalize the adjusting entry for uncollectible accounts, we first need to calculate the total required allowance based on the aging schedule:

  1. Calculate the uncollectible amounts for each category using the provided percentage:
  • Not Past Due: $607,400 * 1% = $6,074
  • 1-30 Days Past Due: $233,000 * 3% = $6,990
  • 31-60 Days Past Due: $121,600 * 12% = $14,592
  • 61-90 Days Past Due: $96,500 * 30% = $28,950
  • Over 90 Days Past Due: $66,000 * 75% = $49,500
  1. Add these totals to find the total required allowance for doubtful accounts:

Total Required Allowance = $6,074 + $6,990 + $14,592 + $28,950 + $49,500 = $106,106

  1. We know we have a credit balance of $8,240 before adjustment. The required adjustment will be:

Required Adjustment = Total Required Allowance - Current Credit Balance Required Adjustment = $106,106 - $8,240 = $97,866

Now, we can create the journal entry:

Journal Entry:

Date: July 31
Account: Allowance for Doubtful Accounts
Debit: $97,866
Credit: Uncollectible Accounts Expense
Credit: $97,866

The final journal entry follows this format:

| Date | Account | Debit | Credit | |------------|----------------------------------|-----------|------------| | July 31 | Uncollectible Accounts Expense | 97,866 | | | July 31 | Allowance for Doubtful Accounts | | 97,866 |

Make sure you record the amounts accurately as per the company's accounting policies.