Although entries have been recorded all year, adjusting entries have not been recorded since December 31, 2019 when the financial statements were last prepared. Refer to the Worksheet (5) tab for unadjusted account balance information as of December 31, 2020. Use the following information to prepare the adjusting entries for Rochester Enterprise on the tab Adjusting Journal Entries (3). Journalize your entries in the order presented on this worksheet. Use the letters a - j in the date column. You will also complete the remaining tabs (4) - (9) in the workbook. On December 1, 2020, Rochester Enterprise had signed and recorded a 5.4% bank loan (refer to the tab Worksheet (5) for the amount) due in 3 years. This is the only outstanding note payable. a. b. Prepaid insurance (see the Worksheet) represents a 6-month insurance policy purchased on December 1, 2020. On November 1, 2020, Rochester Enterprise had paid and recorded $30,000 for a 6-month lease for office space. c. d. Unearned revenue (see the Worksheet) represents a 12-month contract for consulting services that will be performed monthly. The payment from the customer was received and recorded on December 1, 2020. A physical count revealed that supplies on hand at the end of the month total $2,500. е. f. Equipment is depreciated on a straight-line basis; residual value is estimated to be $25,000 with an estimated service life of 5 years. The assets were held the entire year. g. On December 1, Rochester Enterprise accepted from Greene Supplies a 7-month note receivable at a 4.7% annual interest rate. The company uses the percentage-of-receivables basis for estimating uncollectible accounts. The aging schedule of accounts receivable must be completed to determine management's desired balance for 2020. See tab Aging Analysis (4). h. i. Accrued wages totaling $70,000 were unpaid and unrecorded at December 31, 2020. j. Utility costs incurred but unrecorded for the month of December were estimated to be $7,000.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
The question is asked on top of the first image. I have attached the aging analysis below. Thanks in advance :)
Age of Accounts | Balance December 31, 2020 | Estimated % Uncollectible | Estimated Amount Uncollectible | |
Current | 187,616 | 2% | ||
1–30 days past due | 125,705 | 5% | ||
31–90 days past due | 35,345 | 10% | ||
Over 90 days past due | 30,290 | 25% | ||
Total |
$ 378,956 | |||
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