Assignment:
ESTIMATION AND RECORDING OF UNCOLLECTIBLE ACCOUNTS ' AGING OF ACCOUNTS RECEIVABLE METHOD
Part 1 ' In 2009, Vandolay reported $300,000 in sales. The company's allowance for doubtful accounts has an unadjusted credit balance of $12,000. Vandolay Industries accountants prepared the following Aging of Accounts Receivable:
|
Customer
|
Total
|
Number of days unpaid
|
|
|
|
|
0-30
|
30-60
|
60-90
|
Over 90
|
|
Alpha Sales
|
5 700
|
|
5 700
|
|
|
|
Gamma Manufacturing Co.
|
1,900
|
5 1,900
|
|
|
|
|
Delta Shipping Corp.
|
2,200
|
|
|
52200
|
|
|
Epsilon Industries
|
6,000
|
|
|
|
56,000
|
|
Theta Manufacturing
|
1,800
|
|
1,800
|
|
|
|
Zeta Industries
|
600
|
|
600
|
|
|
|
Other customers
|
136,800
|
88,100
|
26,900
|
9,800
|
12,000
|
|
Totals
|
5150,000
|
590,000
|
530,000
|
512,000
|
518,000
|
Vandolay accountants believe that receivables 0-30 days old have a 2% chance of noncollection. Receivables 30-60 days old have a 4% chance of noncollection. Receivables 60-90 days old have an 8% chance of noncollection. Receivables over 90 days old have a 20% chance of noncollection. The company's allowance for doubtful accounts has an unadjusted credit balance of $12,000. Prepare the required adjusting journal entry.
Part 2 ' Assume instead that the company's allowance for doubtful accounts has an unadjusted debit balance of $400. Prepare the required adjusting journal entry.