Problem 1: Blackstock Company has a weekly payroll of $18,375 and grants two weeks' vacation after one year's employment, which amounts to 4% of annual pay. Based on past turnover rates. The employer estimates that 80 percent of employees actually will be granted vacation time. Prepare a general journal entry to record the estimated vacation pay resulting from the weekly payroll.
Problem 2: Fife, Inc. has the following account balances at December 31, 2005: Accounts Receivable $185,600 and Allowance for Doubtful Accounts $1,600 (credit balance). Fife uses the aging of accounts receivable to estimate bad debts. The following aging schedule reflects the situation at year-end:
|
Account Age
|
Age Group Balance
|
Estimated Uncollectible Percentage
|
|
Current
|
$96,000
|
2
|
|
1-30 days past due
|
64,000
|
5
|
|
31-60 days past due
|
16,000
|
15
|
|
61-90 days past due
|
6,400
|
35
|
|
Over 90 days past due
|
3,200
|
45
|
Required:
(Q1) Calculate the amount of the Allowance for Doubtful Accounts that should appear on the December 31, 20X5, balance sheet.
(Q2) Prepare the journal entry to record 20X5 bad debts expense.
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