Problem - Hunter, Inc., analyzed its accounts receivable balances at December 31, and arrived at the aged balances listed below, along with the percentage that is estimated to be uncollectible:
Age Group Balance Probability of Non-collection 0-30 days past due $96,0001%31-60 days past due26,0002%61-120 days past due17,0005%121-180 days past due12,00010%Over 180 days past due10,00025% $161,000
The company handles credit losses using the allowance method. The credit balance of the Allowance for Doubtful Accounts is $1,120 on December 31, before any adjustments.
1. Prepare the adjusting entry for estimated credit losses on December 31.
2. Prepare the journal entry to write off the Rose Company's account on April 10 of the following year in the amount of $1,025.