Outlaw Bike Co. is a wholesaler of motorcycle supplies. An aging of the company's accounts receivable on December 31 and a historical analysis of the percentage of uncollectible accounts in each age category are given below. Age Interval Balance Estimated Uncollectible Accounts Percent Estimated Uncollectible Accounts Amount Not past due $500,000 3/4 % $3,750 1-30 days past due 55,000 4 2,200 31-60 days past due 25,000 6 1,500 61-90 days past due 18,000 14 2,520 91-180 days past due 13,000 42 5,460 Over 180 days past due 9,500 70 6,650 Total $620,500 $22,080 Assume that the allowance for doubtful accounts for Outlaw Bike Co. had a debit balance of $3,975 as of December 31. Journalize the adjusting entry for uncollectible accounts as of December 31.
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.
Entry for Uncollectible Accounts
Outlaw Bike Co. is a wholesaler of motorcycle supplies. An aging of the company's
Age Interval |
Balance |
Estimated Uncollectible Accounts Percent |
Estimated Uncollectible Accounts Amount |
|||
| Not past due | $500,000 | 3/4 | % | $3,750 | ||
| 1-30 days past due | 55,000 | 4 | 2,200 | |||
| 31-60 days past due | 25,000 | 6 | 1,500 | |||
| 61-90 days past due | 18,000 | 14 | 2,520 | |||
| 91-180 days past due | 13,000 | 42 | 5,460 | |||
| Over 180 days past due | 9,500 | 70 | 6,650 | |||
| Total | $620,500 | $22,080 |
Assume that the allowance for doubtful accounts for Outlaw Bike Co. had a debit balance of $3,975 as of December 31.
Journalize the
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