Problem: The following information is provided for the Lurkins Company as of December 31, 2006, before adjusting entries were made.
Net credit sales $4,000,000
Allowance for Uncollectible Accounts
(credit balance) 4,000
Management prepared the following aging of accounts receivable at December 31, 2006.
Percentage
Age Total Estimated Uncollectible
Current $350,000 10%
31-60 days 100,000 15%
61-90 days 80,000 20%
91-120 days 70,000 30%
Over 120 days 40,000 50%
Required:
Question 1: Prepare the adjusting entry to record Bad Debt Expense at December 31, 2006.
Question 2: What is the ending balance in the Allowance for Uncollectible Accounts after the adjusting entry on December 31, 2006, has been made?
Question 3: Determine Net Accounts Receivable at December 31, 2006, before the adjusting entry is made.
Question 4: Determine Net Accounts Receivable at December 31, 2006, after the adjusting entry has been made.
Question 5: How would your entry be affected in a. above if the allowance account contained a debit balance for $4000 before the adjusting entry is recorded (instead of a credit).